CFTC Overrules Michigan Court, Orders Kalshi to Keep Sports Trades Intact

The federal-state fight over prediction markets has reached a new flashpoint. The Commodity Futures Trading Commission has ordered Kalshi not to cancel any trades placed by Michigan customers, directly overriding a state circuit court order that had demanded those transactions be voided and refunded. The move marks the first time the CFTC has stepped in to block a state from unwinding trades already executed on a federally regulated exchange.

The confrontation is about more than one state or one operator. It sets up a direct test of which government — state or federal — has the final word over prediction markets that let users bet on sports outcomes, and it raises the stakes for every other state currently pursuing similar action against Kalshi and its rivals.

A Federal Regulator Draws a Hard Line

The dispute traces back to a Michigan circuit court order issued in June that directed Kalshi to halt sports-related event contracts for state residents after Michigan’s attorney general argued the platform was violating state gaming law. That order went further than a simple stop-offering directive — it also instructed that certain completed customer transactions be voided, cancelled, and refunded.

Kalshi responded by filing an emergency request with the CFTC on July 2, seeking federal guidance on how to comply without breaching its obligations as a registered exchange. The CFTC answered by staying Kalshi’s emergency rule application and asserting that following the state court’s directive would put the company in conflict with the Commodity Exchange Act and the regulations that govern federally designated contract markets.

CFTC Chairman Mike Selig did not mince words in defending the decision. A state cannot force a registered contract market “to violate its obligations,” Selig said, adding that “the Commission will not allow states or state courts to bully registered entities into violating the Commodity Exchange Act and CFTC regulations.”

According to the CFTC, Michigan’s order represents the first attempt by any state to directly interfere with transactions that have already been executed on a federally regulated exchange — a distinction the agency treated as a red line. Selig warned that reversing completed trades could ripple far beyond one platform or one state, calling it “an unprecedented step that risks a cascading effect on the entire marketplace and undermines the certainty in contracting that is a necessary component of a functioning market.” The CFTC’s order further argued that permitting such reversals “would risk shattering public confidence by giving traders cause to worry that the trades they execute today may be unwound a week — or a year — later.”

Part of a Much Bigger Legal Battle

Michigan is just one front in a sprawling nationwide dispute. Nearly two dozen states are now attempting to block prediction market operators from offering sports-related event contracts, arguing the products amount to unlicensed sports betting dressed up as financial derivatives. The CFTC, for its part, maintains it holds exclusive authority over exchanges it has federally registered, leaving no room for individual states to impose their own restrictions on those same products.

That position has already translated into litigation. The CFTC has filed lawsuits against Arizona, Connecticut, Illinois, Kentucky, Minnesota, New Mexico, New York, Rhode Island, and Wisconsin over their efforts to halt or penalize prediction market businesses. The agency has also weighed in through amicus briefs filed with the U.S. Court of Appeals for the Sixth and Ninth Circuits, as well as the Supreme Judicial Court of Massachusetts, signaling it intends to fight this battle in nearly every jurisdiction where it surfaces.

What makes the Michigan order distinct is the target: rather than simply contesting a state’s right to ban future contracts, the CFTC is now blocking a court’s attempt to claw back trades that customers already placed and settled. That is a meaningfully more aggressive federal posture, since it directly nullifies a state judiciary’s remedy rather than just contesting the underlying policy question. For everyday users who have placed Kalshi promo code trades on sports outcomes, it also offers a measure of certainty that positions already settled won’t simply be erased by a court order in a different jurisdiction.

The outcome of this standoff could set precedent for how far state regulators can go in policing federally registered exchanges, and how much protection the CFTC is willing to extend to trades once they’ve cleared. With litigation piling up across nine states and appellate courts already weighing in, Michigan’s case may become the clearest test yet of whether prediction markets ultimately answer to state gaming law or federal commodities law. Bettors following the broader prediction markets space, including platforms like Polymarket promo code offers, should expect this jurisdictional fight to keep shaping which products remain available and where.