Prediction market platform Kalshi says it has been placed in a difficult legal situation after receiving conflicting directives from a Michigan court and the U.S. Commodity Futures Trading Commission (CFTC).
The company argues that it is being forced to choose between complying with a state court order and following instructions from its federal regulator, creating uncertainty over how it should proceed.
Michigan Court Ordered Sports Contracts to Stop
The dispute stems from a ruling issued on June 29 by Ingham County Circuit Court Judge Rosemarie Aquilina. The judge directed Kalshi to stop offering sports-related prediction contracts to users in Michigan while a lawsuit determines whether the platform’s activities violate the state’s sports betting laws.
Following the court’s decision, Kalshi said it complied by unwinding the affected trades as required under the ruling.
Federal Regulator Tells Company to Continue Operations
The legal landscape shifted again on Tuesday when the Commodity Futures Trading Commission instructed Kalshi not to follow the state court’s order to cancel executed contracts.
Instead, the federal regulator directed the company to continue operating, arguing that the state should not interfere with federally regulated derivatives transactions.
The conflicting instructions have left Kalshi uncertain about which legal obligation should take priority.
Kalshi Says It Had No Choice
Reacting to the latest development, Kalshi’s Head of Enforcement and Legal Counsel, Robert DeNault, expressed frustration over the situation.
In a statement shared on X, he said the company had already complied with the Michigan court’s order by reversing the affected trades and insisted that Kalshi had no practical alternative at the time.
DeNault argued that the company is now facing incompatible legal requirements, making it nearly impossible to satisfy both state and federal authorities simultaneously.
CFTC Warns Against State Interference
The CFTC defended its decision, saying Michigan had become the first state to attempt to interfere with derivatives contracts that had already been executed.
According to CFTC Chair Michael Selig, forcing previously completed trades to be canceled could undermine confidence in financial markets and create wider instability.
He maintained that certainty in contractual agreements is essential for properly functioning markets and said the agency would not allow states or state courts to pressure federally regulated entities into actions that conflict with the Commodity Exchange Act and CFTC regulations.
Broader Regulatory Dispute Continues
The dispute highlights a growing jurisdictional battle between the CFTC and nearly two dozen state regulators over who has the authority to oversee prediction markets.
Several states have questioned whether platforms like Kalshi are operating as legal prediction markets or offering products that resemble sports betting, while the federal regulator maintains that these contracts fall under its oversight.
The disagreement has yet to be fully resolved, leaving companies in the sector facing continued legal uncertainty.
Company Reviews Its Next Steps
Kalshi has not indicated how it will respond to the conflicting directives.
A company spokesperson said the platform is reviewing the CFTC’s latest order and evaluating its legal options as the dispute continues.
The case is expected to become another significant test of the balance of power between federal regulators and state authorities in overseeing the rapidly growing prediction market industry.
