On Tuesday, the Commodity Futures Trading Commission (CFTC) used its “emergency” regulatory authority over prediction markets to block a state court-mandated ruling that Kalshi must cancel previously executed trades made by Michigan residents. Kalshi’s proposal to dissolve and refund existing Michigan trades stems from a June 29th temporary restraining order against the prediction market issued by state court judge Rosemarie Aquilina.
READ: Temporary Restraining Order against Kalshi (Michigan State Court, June 29th, 2026)
In addition to ordering Kalshi to immediately halt the trading of sports-related event contracts for Michigan account holders, the temporary restraining order mandates that Kalshi must geofence affected markets from Michigan users no later than August 12th, or face a subsequent $120,000 daily fine for non-compliance. In reaction to the ruling, Kalshi had submitted a proposal to the CFTC to comply with the state court order, but that proposal was overridden Tuesday by the CFTC’s emergency authority.
The CFTC issued an official statement Tuesday explaining its use of “emergency” power to block Kalshi from complying with the Michigan state court’s temporary restraining order.
“The Commodity Futures Trading Commission today exercised its authority to stay an emergency rule change proposed by KalshiEX, LLC in response to a Michigan state court order directing the company to cancel certain previously executed trades involving Michigan residents,” reads the statement. “The CFTC also exercised its emergency authority to order KalshiEX, LLC to fulfill the open trades in accordance with its normal practices.”
Tuesday’s release adds that “the Commodity Exchange Act requires the CFTC to provide a uniform national market in derivatives transactions. Market participants must have impartial access to CFTC-regulated markets and registered entities must adopt transparent access criteria that are applied in a non-discriminatory manner. The Commission is also tasked with ensuring continued public confidence in derivatives markets by guaranteeing market resilience and predictability, including in the execution and clearing of transactions.”
CFTC Chairman Mike Selig provided his own quote within the agency’s official statement.
“A state cannot force a DCM to violate its obligations, and federal law does not permit a DCM to discriminate against a state’s residents. Canceling trades that have already been executed is 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 Commission will not allow states or state courts to bully registered entities into violating the Commodity Exchange Act and CFTC regulations.”
Technically, the CFTC’s decision to exercise emergency authority places Kalshi between two formidable mandates: to dissolve sports-related event contracts executed by Michiganders or to continue operating as if those contracts are completely unaffected by the state court’s temporary restraining order.
The bigger picture points to a near-term showdown between state court geofencing mandates in Nevada and Michigan and the CFTC, one that promises to reach a rolling boil well before the US Supreme Court can potentially hear one or more related cases in 2027 or 2028.
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