CFTC Intervenes to Block Michigan Court Order Demanding Kalshi Cancel Trades

The regulatory tug-of-war over the future of prediction markets in the United States has reached a dramatic flashpoint. On Tuesday, the U.S. Commodity Futures Trading Commission (CFTC) intervened directly in a state-level legal dispute, issuing an order that bars the trading platform Kalshi from complying with a Michigan court’s demand to cancel settled customer transactions.

The federal agency’s intervention represents a significant escalation in its ongoing defense of its exclusive regulatory authority over derivative and event contract platforms. Kalshi, which operates as a registered designated contract market (DCM), finds itself at the center of a jurisdictional battle between federal commodities regulators and state authorities who increasingly view these platforms through the lens of state-level gambling prohibitions.

“The commission will not allow states or state courts to bully registered entities into violating the Commodity Exchange Act and CFTC regulations,” said CFTC Chairman Mike Selig in an official statement accompanying the agency’s order.

Selig, who has historically embraced the growth of prediction markets, has championed a regulatory framework that fosters innovation through friendly regulations. However, his supportive stance is paired with a fierce defense of federal preemption, arguing that the CFTC’s oversight powers supersede state-level interventions.

The conflict highlights a fundamental tension in the digital asset and financial technology landscape. While the CFTC regulates platforms like Kalshi as formal financial exchanges offering event contracts, several state governments have sought to classify and penalize these businesses as illegal gambling operations. While the federal regulator has previously filed lawsuits against states attempting to halt these platforms entirely, the situation in Michigan represents a novel threat. According to the CFTC, Michigan is the very first state to attempt to directly interfere with transaction activity by ordering the retroactive cancellation of completed trades.

From a market infrastructure perspective, the CFTC’s intervention is vital for preserving trade finality—a core tenet of regulated financial markets. Under federal law, transactions executed on a DCM are subject to strict clearinghouse rules designed to ensure systemic stability. Allowing a local state court to retroactively unwind settled trades would not only violate federal rules but could also introduce systemic risk and undermine market integrity. As the legal battle unfolds, the outcome will likely shape the boundaries of federal preemption and determine how freely prediction platforms can operate across state lines.