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 August 12 on July 13, raising the daily fine to $500,000. The next day, CFTC Chairman Selig used the agency's emergency authority under the Commodity Exchange Act to order Kalshi to continue honoring Michigan trades — directly contradicting the state court's order. Kalshi is now caught between two conflicting legal mandates with no clear path to comply with both.
Michigan's Ingham County Circuit Court Judge Rosemarie Aquilina extended Kalshi's sports-contract ban on July 13, 2026, the day the original temporary restraining order was due to expire after its June 29 issuance. Rather than let it lapse, Aquilina gave Kalshi 30 days — until August 12 — to implement proper geofencing to block Michigan users from its sports event contracts, 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 to implement — 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.
The day after, the CFTC escalated. On July 14, CFTC Chairman Michael Selig invoked the agency's emergency authority under the Commodity Exchange Act and issued a direct order to Kalshi: honor all open event-contract trades by Michigan users, regardless of what the state court has ordered. The basis was that a state court cannot compel a federally designated contract market to cancel validly executed trades, and that canceling those trades would undermine the certainty of contract that all derivatives markets depend on. 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, the financial regulation advocacy group, called the CFTC's action 'lawless' and accused the agency of directing a regulated entity to defy a court order.
The result is a direct collision between two legal mandates. The Ingham County court's extended restraining order says Kalshi must stop Michigan users from trading sports event contracts and geofence the state by August 12 or pay $500,000 per day. The CFTC's emergency order says Kalshi must honor those trades. Compliance with one order means contempt of the other. Kalshi said it was reviewing the CFTC's order and considering its next steps. The company is caught between a state judge who can fine it $500,000 per day and a federal agency that can revoke its exchange license — and the two are giving it opposite instructions.
The constitutional structure of this conflict is unprecedented. The CFTC and a state court have now issued formally incompatible orders to the same entity about the same trades. This is the direct consequence of the CFTC having failed to obtain a preliminary injunction in Michigan federal court in June, when Judge Paul Maloney denied Polymarket and Robinhood's motion and ruled that sports event contracts are likely not swaps under federal law. The CFTC is now attempting through executive emergency action what it could not obtain through litigation. Whether the agency's emergency authority under the CEA 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 August 12.
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Utah Files Felony Charges Against Kalshi and Its Founders — Second State to Criminally Charge a Platform
Utah filed criminal charges against Kalshi and its two co-founders, Tarek Mansour and Luana Lopes Lara, on October 28 — 13 felonies and a misdemeanor, including a second-degree 'pattern of unlawful criminal activity' count and 12 counts of online gambling promotion. The charges stem from a September sting in which an undercover agent placed 12 sports wagers verified to be in Utah. The CFTC sued Utah the day before to block state enforcement, its tenth such suit. Utah is the second state after Arizona to criminally charge Kalshi, and the first to charge the founders personally. Kalshi called it a 'crazy overreach.'
NBA Names Kalshi and Polymarket Preferred Exchanges — Leaving the NFL Alone in Opposition
The NBA announced on October 26 that it has named Kalshi and Polymarket its 'preferred prediction market exchanges,' signed a non-binding memorandum of understanding with the CFTC on basketball integrity, and expanded its DraftKings deal to include prediction markets — the first league to extend a sportsbook partnership into the category. The exchange deals bar league and team personnel from trading NBA contracts, limit permissible markets, and require sharing of suspicious-trading data, in exchange for NBA intellectual property and official data. The NBA joins MLB, the NHL, and MLS as partnered leagues, leaving the NFL as the lone major holdout — and the only league fighting the platforms in court.
CFTC Chair Says Agency Is Watching Prediction Markets for Manipulation Ahead of Midterms
CFTC Chairman Michael Selig said on October 23 that the agency is closely monitoring prediction markets for manipulation ahead of the November 3 midterms, and that it is separately scrutinizing oil market trading tied to President Trump's announcements about the war in Iran. Combined midterm open interest on Kalshi and Polymarket stood at $250 million as of October 18, with Kalshi holding 84%. Selig acknowledged the agency often catches political figures attempting to trade 'oftentimes after the fact.' The remarks highlight the CFTC's dual and somewhat conflicting role as both the platforms' federal protector and their manipulation watchdog, at a time when the agency has shed enforcement staff.