CFTC orders Kalshi to honor Michigan trades despite state court block
The CFTC has ordered Kalshi to honor and process existing trades from Michigan residents, overriding a state court order that had directed the platform to cancel those contracts. The federal regulator filed an emergency motion arguing that canceling executed trades would disrupt market integrity and harm traders who acted in good faith. Kalshi's legal counsel said the company is in an 'impossible position' caught between conflicting demands. The standoff deepens a jurisdictional clash over whether CFTC registration preempts state gambling law.
Kalshi must now choose which authority to defy: Michigan's state court demanding trade cancellations, or the CFTC ordering payouts under emergency powers. Complying with Michigan exposes Kalshi to federal enforcement and potential loss of its designated contract market status. Following the CFTC triggers the state's $500,000 daily non-compliance fine.
The standoff shreds the preemption shield that CFTC registration once provided against state gambling laws. New York already denied Kalshi's injunction bid. Illinois, Minnesota, Kentucky, New Mexico, and Massachusetts each demand separate legal firepower. The Second Circuit appeal is now the last forum where Kalshi can argue for a uniform federal shield.
The CFTC's emergency intervention in Michigan joins a broader federal counteroffensive that already includes a lawsuit against Minnesota's felony ban, as the regulator tries to rebuild a crumbling preemption shield now under assault in New York, Illinois, Kentucky, New Mexico, Massachusetts, and Connecticut.