The U.S. Commodity Futures Trading Commission has ordered Kalshi to honour certain event contracts involving Michigan residents, blocking the exchange's proposed trade cancellations. According to reports from AMBCrypto, the CFTC exercised its emergency authority to stay an emergency rule that Kalshi submitted on July 14 to force-liquidate certain event contracts held by Michigan users. The regulator directed Kalshi to fulfil the affected trades in accordance with its normal operating procedures while it reviews the matter. As reported by The Economic Times, the CFTC's action represents the latest head-on collision between federal regulators supportive of the fast-growing prediction market industry and nearly two dozen states and Native American tribes seeking to block sports betting companies.
Kalshi faces an unprecedented operational crisis after receiving conflicting directives from federal and state authorities. According to a July 14 order from the CFTC, Kalshi must continue operating in Michigan despite the platform having already unwound sports event trades to comply with a state court order. In a statement posted on X, Kalshi's head of enforcement and legal counsel, Robert DeNault, expressed disappointment with the decision and stated the company was caught between conflicting federal and state directives. 'We already acted and unwound the trades, as the Michigan court order required us to do. We are being put in an impossible position, looking to follow state court orders that may contradict our federal regulatory obligations. We did not have a choice,' DeNault said. A Kalshi spokesperson told Reuters the company is reviewing the CFTC's order and weighing its next steps.
The CFTC warned that allowing executed derivatives contracts to be cancelled would undermine confidence in regulated markets and threaten the certainty required for price discovery and orderly trading. According to the Commission's order reported by AMBCrypto, forcing exchanges to unwind completed trades could create broader market distortions, damage confidence among market participants and potentially affect pricing across related derivatives markets. CFTC Chairman Michael Selig emphasized that certainty in contracting is fundamental to the proper functioning of U.S. derivatives markets. As reported by The Economic Times, the CFTC said it was staying an emergency rule application from Kalshi to comply with the court's order because the order interfered with federal law, which the CFTC says permits trade in most sports-related event contracts. In a statement issued with the order, CFTC Chairman Mike Selig warned that canceling already executed trades would be unprecedented and could trigger a cascading loss of public confidence in regulated markets.
CFTC Chairman Michael Selig has strongly criticized state court intervention, stating that 'A state cannot force a DCM to violate its obligations, and federal law does not permit a DCM to discriminate against a state's residents.' He added that cancelling completed trades risked undermining certainty in contracting and that the Commission 'will not allow states or state courts to bully registered entities into violating the Commodity Exchange Act and CFTC regulations.' The CFTC framed the case as part of a wider effort to defend its exclusive authority over federally regulated derivatives markets. Speaking on Fox Business, Selig also said it was 'critical' that the CFTC preserve its authority over prediction markets and noted the agency had already sued nine states and would continue taking legal action against any state seeking to impose civil or criminal penalties on CFTC-registered exchanges. The Commission emphasized that Michigan became the first state to attempt to interfere with derivatives contracts after they had already been executed, describing the move as a challenge to the federal framework governing designated contract markets.
