CFTC orders Kalshi not to cancel Michigan trades after state court directive

The Commodity Futures Trading Commission used emergency authority on July 14 to stop Kalshi from force-liquidating trades involving Michigan users and directed the exchange to settle those contracts normally during a review period of up to 90 days. Kalshi said it had already unwound the trades to comply with a June 29 order from Ingham County Circuit Court Judge Rosemarie Aquilina and is now caught between conflicting state and federal directives. Robert Denault, Kalshi's head of enforcement, said the company was disappointed and had been placed in an "impossible position" because it was trying to comply with a state court order that may conflict with its federal regulatory obligations. Kalshi had asked the CFTC on July 12 to approve an emergency rule that would force-liquidate certain positions held by Michigan residents, implement geofencing and cover any resulting losses from its own operational funds. The filing said the directive applied only to a limited set of sports positions originally matched between Michigan traders and Kalshi Trading LLC, which it described as a minute percentage of Kalshi's sports volume. The clash highlights a broader unresolved dispute over whether sports event contracts on federally regulated platforms fall under the Commodity Exchange Act or state gambling laws. CFTC Chairman Michael Selig said states cannot force a designated contract market to violate federal law and warned that canceling executed trades could disrupt price formation, undermine confidence in market finality and create broader volatility across related contracts and exchanges. Michigan is the first state, by the CFTC's account, to try to directly interfere with previously executed derivatives transactions.