Michigan's court said cancel the trades. The CFTC said fulfill them. Here's what a federal-state orders collision means for prediction market traders.
On July 14, 2026, the CFTC issued Release 9267-26 — a federal order requiring KalshiEX to fulfill all open trades as normal. Hours earlier, a Michigan state court order had directed the company to cancel those same trades.
This created the first instance of directly conflicting state-court and federal-regulator orders over prediction market trades. The CFTC called Michigan’s action unprecedented: “the first state to attempt to interfere directly with executed derivatives transactions.”
CFTC Chairman Michael S. Selig framed the federal position clearly: “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.”
Source: CFTC Release 9267-26 (cftc.gov); Michigan Ingham County Circuit Court proceedings.
Michigan Attorney General Dana Nessel filed a complaint in Ingham County Circuit Court alleging Kalshi's sports-event contracts constitute illegal sports betting under Michigan law.
Judge Rosemarie Aquilina, Ingham County Circuit Court granted a temporary restraining order requiring Kalshi to stop accepting new bets from Michigan residents. The order was the first state-court TRO against a CFTC-designated contract market.
At a status hearing, the court reviewed compliance and extended the enforcement period. Details are pending court docket confirmation.
The CFTC stayed Kalshi's proposed emergency rule change and issued its own order requiring KalshiEX to fulfill all open trades in accordance with its normal practices. Chairman Selig stated: "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." The CFTC described Michigan as the first state to attempt to directly interfere with already-executed derivatives transactions.
The CFTC emergency order specifically requires Kalshi to fulfill open trades per its normal practices. The Commission made clear that canceling already-executed trades would undermine market certainty.
Kalshi is implementing state-level geofencing for Michigan residents in response to the state court order. This affects new market entry — not positions already open.
The court order names KalshiEX specifically. ForecastEx (IBKR), FanDuel Predicts, DraftKings DKeX, and PredictIt are not party to the Michigan proceeding.
Courts have not yet resolved whether the CEA preempts state gaming laws for CFTC-registered DCMs. Third Circuit ruled in favor of federal preemption (Apr 2026). Sixth Circuit oral arguments are scheduled for July 30, 2026.
Access status reflects the July 2026 standoff. Verify current availability at each platform before trading.
The CFTC has filed preemption lawsuits against Arizona, Connecticut, Illinois, Kentucky, Minnesota, New Mexico, New York, Rhode Island, and Wisconsin. Michigan is a separate case — the only state to have sought cancellation of executed trades, which the CFTC characterized as unprecedented.
In April 2026, the U.S. Court of Appeals for the Third Circuit ruled 2-1 in KalshiEX LLC v. Flaherty that the Commodity Exchange Act gives the CFTC exclusive jurisdiction over trades on designated contract markets, and state gaming enforcement is preempted. Michigan’s state court has not addressed this ruling.
The U.S. Court of Appeals for the Sixth Circuit is scheduled to hear oral arguments on July 30, 2026 in consolidated Ohio and Tennessee cases. A ruling supporting federal preemption would directly undercut Michigan’s position. A ruling for state authority would validate Michigan’s approach and create a circuit split.
Michigan established that state courts will pursue trade-cancellation remedies — not just platform bans — against CFTC-registered DCMs. If Michigan’s approach survives federal review, other states with enforcement interest may follow the same playbook.
The Commodity Exchange Act grants the CFTC exclusive jurisdiction over “covered swap” transactions and futures on designated contract markets. But the CEA’s preemption scope is not absolute — courts have found state consumer-protection and gaming laws can coexist with federal commodity regulation in some circumstances.
Michigan argues prediction market sports-event contracts are gambling products, not derivatives. The CFTC argues CFTC-designated contract markets and the trades they execute cannot be second-guessed by state gaming authorities. Until an appellate court — or the Supreme Court — resolves this circuit-level question, the standoff persists.
Michigan is currently the only state with a court order that directly conflicts with a CFTC emergency order. It is the sharpest expression of the broader federal-state conflict that has run through this industry since 2025.
