CFTC tells Kalshi not to obey Michigan order to cancel completed user trades

Dispute over Michigan order

The conflict stems from a legal fight in Michigan over Kalshi’s online sports-betting service. In June, a county circuit court in the state ordered Kalshi to stop offering that service. The dispute escalated on July 2, when the same court issued another order directing the company to cancel and refund trades made by Michigan users.

That second order prompted Kalshi to seek emergency relief from the CFTC, which oversees the company in its role as a designated contract market.

CFTC warns of market disruption

In its response, the CFTC said Kalshi should not comply with the cancellation directive. The agency argued that forcing a regulated market operator to reverse trades that have already been executed could create broader disruption beyond the immediate case.

According to the regulator, the issue is not limited to the affected Michigan accounts. The CFTC said allowing completed contracts to be unwound after the fact could weaken contractual certainty, a principle it described as important to market functioning.

The agency further argued that if market participants cannot rely on trades remaining valid once executed, confidence in the integrity of those markets could suffer.

Commissioner says cancellations would be unprecedented

CFTC Commissioner Mike Selic said the agency would not allow state governments or courts to pressure registered entities into violating the Commodity Exchange Act or CFTC rules. He described the cancellation of already executed trades as unprecedented and warned that such a step could erode confidence in the market.

The CFTC’s position frames the Michigan order as more than a state-level dispute over one platform. In the agency’s view, requiring a federally regulated venue to cancel completed transactions would raise wider questions about whether contracts executed under federal oversight can later be invalidated through state action.

Broader fight over prediction markets

The Michigan case is part of a larger clash over how prediction-market businesses should be regulated. The CFTC has also sued several states that are seeking to treat such platforms as illegal gambling operations.

The agency said Michigan is the first state to go beyond efforts to regulate the business and directly demand the cancellation of trades that have already taken place. That distinction appears to be central to the CFTC’s intervention, as the regulator argues that post-trade reversals pose a unique risk to market confidence.

The latest move does not resolve the underlying dispute over Kalshi’s offerings in Michigan, but it does make clear that the federal regulator does not want a registered market operator complying with a state order that, in its view, would conflict with federal commodities law and established market rules.