The CFTC Told Kalshi to Defy a State Court Order — and Kalshi Is Caught in the Middle
Michigan's Judge Aquilina extended Kalshi's sports-contract ban through 12 August on 13 July, raising the daily fine to $500,000. The next day, CFTC Chairman Selig used emergency authority under the Commodity Exchange Act to order Kalshi to continue honouring Michigan trades — directly contradicting the state court's order. Kalshi is now caught between two conflicting legal mandates.
Michigan's Ingham County Circuit Court Judge Rosemarie Aquilina extended Kalshi's sports-contract ban on 13 July 2026, the day the original restraining order was due to expire. Aquilina gave Kalshi 30 days — until 12 August — to implement proper geofencing or face a daily fine raised from $120,000 to $500,000. The 30-day window was twice what the Michigan Attorney General had requested. GeoComply, the geolocation vendor Kalshi had just engaged, testified that geofencing typically takes one to two weeks but that Kalshi had only been working with GeoComply for three to four days at the time and could not give the court a compliance timeline.
On 14 July, CFTC Chairman Michael Selig invoked emergency authority under the Commodity Exchange Act and ordered Kalshi to honour all open event-contract trades by Michigan users, regardless of what the state court has ordered. Selig said: '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.' Better Markets called the action 'lawless', accusing the CFTC of directing a regulated entity to defy a court order.
For UK readers, the jurisdictional comparison is instructive. UK derivatives markets are regulated by the FCA, and a UK court would be unlikely to issue orders that directly contradict FCA mandates. The US federal-state system creates genuine ambiguity that the UK unitary regulatory structure does not. Kalshi is caught between a state judge who can fine it $500,000 per day and a federal agency that can revoke its exchange licence — and the two are giving it opposite instructions. This is a preview of what happens when prediction markets try to operate nationally under a 'federal preemption' legal theory in a country where that theory has not yet been definitively settled.
Kalshi said it was reviewing the CFTC's order and considering next steps. The company faces a direct collision: the state court order says geofence by 12 August or pay $500,000 per day; the CFTC emergency order says continue honouring Michigan trades. Compliance with one is contempt of the other. Whether the CFTC's emergency authority can override a state court's contempt power has no clear precedent — and that question is almost certainly heading to a federal appellate court before the 12 August deadline.
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