The legal battle over prediction markets in the United States has intensified after the Commodity Futures Trading Commission (CFTC) directed Kalshi to continue operating in Michigan, despite a state court order requiring the platform to stop offering sports event contracts.
The dispute adds new uncertainty for federally regulated prediction markets, many of which have become increasingly popular among crypto users and traders looking for exposure to event-based contracts.
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.
We are being put in an impossible position, looking to follow state court orders that may contradict our federal… https://t.co/M81qNaOzCY
— robertjdenault (@robertjdenault) July 14, 2026
Why is Kalshi caught between state and federal regulators?
Kalshi says it has been placed in an impossible situation after receiving conflicting instructions from state and federal authorities. In a statement posted on X, Robert DeNault, the company’s head of enforcement and legal counsel, said Kalshi had already complied with the Michigan court’s order by unwinding the affected trades.
According to DeNault, the company had no choice but to follow the state court ruling at the time, even though doing so may conflict with its obligations as a CFTC-regulated exchange. The company said it is now reviewing the CFTC’s latest order and evaluating its next legal steps.
READ ALSO: Kalshi Considers Potential IPO as Prediction Markets Face Regulatory Pressure
On Tuesday, the CFTC ordered Kalshi not to comply with a Michigan court ruling that forced the company to unwind sports event contracts offered to users in the state. The federal regulator argued that reversing completed derivatives trades threatens market stability and conflicts with federal law.
The order comes after Ingham County Circuit Court Judge Rosemarie Aquilina ruled on June 29 that Kalshi must stop offering sports betting-related contracts in Michigan while a lawsuit over the platform’s compliance with state gambling laws continues.
CFTC defends federal oversight of prediction markets
CFTC Chair Michael Selig criticized Michigan’s actions, saying the state had become the first to interfere with already executed derivatives transactions.
He warned that cancelling completed contracts could undermine confidence in regulated financial markets by creating uncertainty around legally executed trades.
Selig also said the agency would continue defending its authority over federally regulated prediction markets, arguing that states should not force registered exchanges to violate the Commodity Exchange Act or CFTC regulations.
What does the dispute mean for crypto-linked prediction markets?
The dispute showcases the ongoing struggle between federal regulators and several U.S. states over who has the authority to oversee prediction markets.
The issue is closely watched by the crypto industry because event-based markets often attract digital asset users and share infrastructure and trading activity with other blockchain-based financial products.
Kalshi has already filed lawsuits against multiple states challenging enforcement actions, even as it prepares for a potential IPO, and Selig recently said the agency would continue supporting legal action against any state that attempts to impose penalties on CFTC-registered exchanges.
The outcome of the case could shape how prediction markets, including those with strong ties to the crypto ecosystem, are regulated across the United States.
Enjoyed this? Bookmark DeFi Planet, explore related topics, and follow us on Twitter, LinkedIn, Facebook, Instagram, Threads and CoinMarketCap Community for seamless access to high-quality industry insights
Take control of your crypto portfolio with DEFI PLANET PRO, DeFi Planet’s suite of analytics.
