The entrance to CFTC headquarters at Lafayette Center in Washington, D.C.

Michigan Ordered Kalshi to Unwind Trades. The CFTC Just Ordered the Opposite

By Isaac • July 14, 2026 5:16 pm • Comments

A Michigan judge told Kalshi to cancel and refund certain trades. The federal derivatives regulator has now told Kalshi to let those same trades finish.

Both directives are aimed at the same contracts. They point in opposite directions.

That makes Tuesday’s intervention by the Commodity Futures Trading Commission more than another argument over whether a sports prediction contract is gambling.

Trending: The CLARITY Act’s Hardest Fight Is Over Who Gets to Profit

It is now a direct fight over who controls an already-executed trade on a federally regulated exchange.

The CFTC said it stayed an emergency rule change filed by KalshiEX and ordered the company to fulfill pending trades involving Michigan residents.

Kalshi had proposed the rule after an Ingham County Circuit Court order required the platform to stop offering certain sports contracts in Michigan and unwind positions that residents had already opened.

The federal regulator agreed that the state dispute could affect more than Kalshi and Michigan. Its concern was what happens to a national derivatives market if a state court can reach backward and erase completed transactions.

CFTC Chairman Mike Selig said the agency was acting to preserve non-discriminatory access and predictable settlement on federally regulated markets. The release treats those features as national protections, not terms that can change at a state border.

The agency also placed Michigan inside a broader jurisdictional fight. It has filed federal cases involving state officials elsewhere as it argues for exclusive federal oversight of designated contract markets.

Michigan sees the underlying product very differently.

The Michigan Gaming Control Board said the June 29 temporary restraining order barred Kalshi from offering unlicensed internet sports betting to people located in the state. The board presented the order as an immediate consumer-protection measure.

The board argues that calling a product an event contract does not change its economic substance when a customer puts money on the outcome or score of a sporting event.

Its position turns on the activity being offered, not the financial label attached to it. Michigan says federal exchange registration cannot substitute for a state sports-betting license.

Michigan also points to protections imposed on licensed sportsbooks. Those include a minimum betting age of 21, identity checks, responsible-gaming tools and rules governing customer funds.

Kalshi permits users who are 18, according to the state’s filing, and does not hold a Michigan sports-betting license.

The board also says licensed wagering supports state funds for schools, problem-gambling services, first responders and local public programs. In its view, an unlicensed platform avoids both the consumer rules and the public obligations imposed on approved operators.

The state court’s temporary order required licensed geolocation technology and set a fine of $120,000 per day for failing to comply with that requirement. The court tied that technology to Michigan’s existing technical standard.

The order initially ran for 14 days. It prohibited Kalshi and anyone acting on its behalf from offering, advertising or facilitating covered internet sports betting to a person located in Michigan.

That location-based restriction addressed new activity. The dispute became sharper when the court clarified that affected trades already on Kalshi’s books had to be voided, canceled and refunded.

At that point, compliance no longer concerned only the platform’s front door. It reached the terms on which existing positions would leave the market.

Blocking new access is one thing. Rewriting positions after buyers and sellers have already agreed on a price is another.

The CFTC’s nine-page order explains why the agency treated that distinction as an emergency. It examines both the legal collision and the mechanics of Kalshi’s proposed unwind.

Kalshi’s proposed solution did not return the original purchase price in every case. It planned to force-liquidate a limited group of positions at current market value.

If a customer received less than the position’s cost, Kalshi proposed paying the difference from its own operational funds. That make-whole payment would come from Kalshi rather than the contract market.

That mechanism would protect customers from a direct loss on the forced exit. It would not preserve the contract they bought or the settlement they expected if the event later resolved in their favor.

The CFTC concluded that even a limited forced unwind could distort prices, disrupt settlement and create uncertainty about whether trades on a designated contract market remain final.

The agency stayed Kalshi’s rule under CFTC Rule 40.6(c)(1) and used its authority under the Commodity Exchange Act to direct normal fulfillment of the pending positions.

The stay begins a 90-day review. The CFTC also opened a 30-day public comment period on the rule change.

This does not make Michigan’s court order disappear. Nor does it produce a final ruling that every sports event contract is beyond state gambling law.

Instead, Kalshi now sits between two regulators asserting different authority over the same activity.

CFTC Chairman Mike Selig framed the intervention as protection for a uniform national derivatives market. If one state can force trades to be canceled after execution, the agency argues, market participants cannot know whether the same contract will be honored everywhere else.

Michigan’s answer is that federal registration cannot become a blanket license to offer what the state considers unlicensed sports wagering.

Both positions reach beyond this case.

CoinDesk reported that Michigan was the first state to interfere directly with already-executed Kalshi trades. Other states have moved against prediction-market sports contracts, but the forced unwind raised a new market-integrity question.

The CFTC release said the agency has brought federal suits involving officials in Arizona, Connecticut, Illinois, Kentucky, Minnesota, New Mexico, New York, Rhode Island and Wisconsin.

Those cases may determine how far federal preemption reaches. The Michigan collision adds another question: even if a state can block future contracts, can it compel a federally regulated market to cancel positions that already exist?

The answer will affect more than sports markets. Any ruling about the finality of an executed contract could matter to exchanges, clearing systems and customers who assume a trade remains enforceable once it is matched.

That is why the Michigan case has become the sharpest test in the wider state campaign against prediction platforms.

For traders, the difference is not abstract.

A refund returns money under one formula. A normal settlement pays according to the event outcome and the contract terms.

A forced liquidation pays at an interim market price. Those three paths can produce very different results.

The CFTC has chosen the normal-settlement path for the pending Michigan positions while it reviews Kalshi’s rule.

The courts still have to decide whether the regulator can hold that line against the state.

Until then, the trades remain alive and the jurisdictional fight has moved from theory to the settlement ledger.

Join the conversation!

We have no tolerance for comments containing violence, racism, profanity, vulgarity, doxing, or discourteous behavior. If a comment is spam, instead of replying to it please click the icon below and to the right of that comment. Thank you for partnering with us to maintain fruitful conversation.

 

Search ProCoinNews