Prediction market Kalshi caught between conflicting CFTC and Michigan directives
Federal commodities regulators prevented Kalshi from reversing Michigan transactions, intensifying a jurisdictional dispute between federal and state authorities over prediction market oversight.
The prediction market platform Kalshi claims it has been placed in an "impossible position" following a Tuesday directive from the US commodities regulator prohibiting the company from reversing trades in Michigan, directly conflicting with a recent state court ruling.
Judge Rosemarie Aquilina of the Ingham County Circuit Court issued an order on June 29 requiring Kalshi to stop providing sports betting contracts to users in Michigan during the pendency of litigation concerning potential violations of the state's sports betting regulations. However, the Commodity Futures Trading Commission issued a directive to Kalshi on Tuesday instructing the company to disregard the state court's order and maintain normal operations.
"We are disappointed by this decision and believe it is unfair to Kalshi," Robert DeNault, the company's head of enforcement and legal counsel said in a statement on X.
"We already acted and unwound the trades, as the Michigan court order required us to do. We are being put in an impossible position, looking to follow state court orders that may contradict our federal regulatory obligations. We did not have a choice."
The dueling directives underscore an ongoing regulatory conflict between the CFTC and approximately two dozen state regulatory agencies regarding jurisdictional authority over prediction markets. According to the CFTC, Michigan represents the first state that has sought to interfere with derivatives transactions that have already been executed.
"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,"
CFTC Chair Michael Selig
"The Commission will not allow states or state courts to bully registered entities into violating the Commodity Exchange Act and CFTC regulations."
According to Reuters, a Kalshi spokesperson indicated the company was examining the CFTC's order and evaluating its next steps.