CFTC blocks Kalshi from canceling Michigan trades

A major federal regulator has intervened to block a prediction market platform from canceling trades for Michigan residents, escalating a legal battle over whether such markets constitute gambling or regulated financial products. On July 14, the U.S. Commodity Futures Trading Commission ordered KalshiEX LLC to honor executed trades involving Michigan residents, staying an emergency rule the company had proposed to comply with a conflicting state court order.

The dispute stems from a temporary restraining order issued by a Michigan circuit court on June 29. The court barred Kalshi from listing, trading, clearing, or settling any contracts it deemed to be sports bets for Michigan residents and later ordered the company to cancel and refund certain existing trades. In response, Kalshi submitted a proposed emergency rule to the CFTC on July 12, seeking authority to forcibly liquidate the affected contracts.

The CFTC, asserting its federal authority, blocked that rule. The commission stated that forcing the unwinding of previously executed trades constitutes a major market disturbance that prevents accurate price discovery. It warned that such an action would shatter public...