Michigan Pursues Legal Action Against Kalshi While Supreme Court Battle Approaches
The prediction markets operator Kalshi faces potential daily penalties reaching $500,000 for allegedly defying a judicial order that prevents the platform from providing sports wagering services to Michigan residents.
State officials in Michigan revealed that a preliminary injunction has been issued by a local court against Kalshi, effectively preventing the prediction markets operator from serving state residents in what authorities characterize as "sports betting [...] masquerading as an investment opportunity."
According to a statement released on Wednesday, Attorney General Dana Nessel disclosed that the Circuit Court for the 30th Judicial Circuit in Ingham County had granted an order prohibiting Kalshi from making event contracts available to individuals residing in the state. Violations of this order could result in financial penalties of up to $500,000 daily.
"Kalshi long attempted to pass itself off as a legitimate gaming operation in our state, and I am relieved that this order further protects Michigan residents from its predatory, unlicensed practices," said Nessel.
This action by Michigan's judicial system represents another chapter in an ongoing series of legal confrontations between prediction market operators such as Kalshi and Polymarket and state regulatory authorities throughout the United States. In March, Nessel initiated legal proceedings against Kalshi, contending that the company was in violation of state regulations governing sports gambling — accusations that have been echoed in numerous comparable legal actions filed nationwide.
Significantly, this preliminary injunction arrived after a Michigan court issued a restraining order in June that prohibited Kalshi from providing sports betting services to state residents. The US Commodity Futures Trading Commission (CFTC) subsequently directed Kalshi to disregard the state order and maintain its operations, a directive that the platform characterized as placing it in an "impossible position."
Cointelegraph reached out to Kalshi for comment but did not receive an immediate response.
New Jersey petitions US Supreme Court to weigh in on prediction markets
The issuance of the Michigan state court order occurred on the same day that New Jersey officials revealed they had submitted a petition for a writ of certiorari to the US Supreme Court regarding the state's legal dispute with Kalshi. Should the Supreme Court justices agree to hear the case, it has the potential to resolve conflicting legal interpretations concerning whether the CFTC or individual state authorities possess jurisdiction over prediction market operations.
"[I]t would be reasonable for the Supreme Court to take it up, but they also may wait for the cases to be decided on the merits and not simply procedural issues like granting a preliminary injunction or not," Melinda Roth, a visiting professor of practice at New England Law in Boston, told Cointelegraph. "Nevertheless, I still believe the Supreme Court will take this up, if not from New Jersey's cert petition, then soon, given the amount of ongoing litigation in this area."
Roth added:
"If and when SCOTUS takes it up, then this will likely decide whether sports event contracts are federally regulated by the CFTC or the states have the right to ban and/or regulate them as they see appropriate. I say 'likely' because Congress might actually act too. They could act before a SCOTUS review, or even after too."
Several members of Congress have put forward legislative proposals aimed at addressing concerns about Kalshi and Polymarket users exploiting insider information when trading event contracts. During March, Senators Adam Schiff and John Curtis presented a bill designed to prevent platforms operating under CFTC registration from listing any event contract that "resembles a sports bet or casino-style game," thereby transferring jurisdictional authority to state-level regulatory bodies.