CFTC orders Kalshi to reinstate unwound Michigan trades

CFTC forces Kalshi to restore canceled Michigan trades

The Commodity Futures Trading Commission (CFTC) has ordered Kalshi to complete pending trades it had previously unwound in response to a Michigan state court order, escalating a jurisdictional fight over prediction markets and state gambling law.

The federal agency said it stayed a Kalshi rule change and used its emergency authority to compel the exchange to honor the affected contracts. That effectively reverses Kalshi’s earlier move to cancel those trades after the Michigan directive.

Kalshi says it’s stuck between regulators

Kalshi blasted the decision, arguing the CFTC has left it trapped between conflicting state and federal demands.

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In a statement on July 14, 2026, Kalshi’s Head of Enforcement and Legal Counsel, Robert Denault, said the company only unwound the trades because it believed the Michigan order was binding:

“We are disappointed by this decision and believe it is unfair to Kalshi. We already acted and unwound the trades, as the Michigan court order required us to do.”

Denault said the CFTC’s order creates a direct conflict:

“We are being put in an impossible position, looking to follow state court orders that may contradict our federal regulatory obligations.”

He added:

“We did not have a choice.”

Emergency order heightens state–federal clash

According to the CFTC, the agency exercised its emergency powers to stay Kalshi’s rule change and force the exchange to fulfill pending trades that had been unwound.

Kalshi maintains it acted properly when it canceled those trades, saying it was complying with the Michigan court’s instructions during ongoing state proceedings. The company now argues the CFTC directive conflicts with its obligations in that case.

The legal dispute stems from a lawsuit by Michigan Attorney General Dana Nessel, who alleges Kalshi is running an unlicensed sports betting business in the state while presenting itself as a federally regulated prediction market.

The complaint claims Michigan residents can buy contracts tied to sporting events without Michigan Gaming Control Board approval, in violation of state gambling laws and the Lawful Sports Betting Act. State lawyers pointed to contracts tied to hockey, golf, basketball and other sporting events, where customers profit if their predictions are correct.

Michigan has argued that sports-based event contracts amount to gambling. Kalshi has consistently countered that its contracts are financial instruments governed by federal commodities law, not state gaming rules.

Case sent back to state court

The fight has already seen one major procedural swing. A federal judge recently sent the case back to Michigan state court, rejecting Kalshi’s attempt to keep the dispute in federal court.

That ruling allowed Michigan’s request for a preliminary injunction to proceed before the state judge, setting the stage for the current clash over how Kalshi treats Michigan-linked trades.

CFTC warns against state “bullying”

CFTC Chairman Michael S. Selig framed the issue as a test of federal oversight of designated contract markets (DCMs):

“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,” said Chairman Michael S. Selig.

He called Kalshi’s earlier move to unwind already-executed trades a serious threat to market integrity:

“Canceling trades that have already been executed is an unprecedented step that risks a cascading effect on the entire marketplace and undermines the certainty in contracting that is a necessary component of a functioning market. The Commission will not allow states or state courts to bully registered entities into violating the Commodity Exchange Act and CFTC regulations.”