A judge in Michigan has mandated that Kalshi cease offering sports event contracts to users in the state, cautioning the prediction market platform of a daily fine of $120,000 if it disregards this order.
On Monday, Ingham County Circuit Judge Rosemary Aquilina approved a request from state attorneys for a temporary restraining order (TRO) related to Kalshi’s contracts, concluding that “Michigan and its most vulnerable citizens are facing … immediate and irreparable harm unless they are shielded from being exploited by Kalshi’s sports betting operations disguised as an investment opportunity.”
Legal Action from AG
Michigan Attorney General Dana Nessel initiated legal proceedings against Kalshi in March, claiming the contracts constitute sports betting, which requires state licensing and regulation. Kalshi contends that these contracts are financial derivatives subject to oversight by the federal Commodity Futures Trading Commission (CFTC) and that federal regulations supersede state authority.
The TRO will remain effective until the case is settled and mandates that Kalshi engage a Michigan-licensed third-party geolocation service provider for compliance.
Michigan is the second state to restrict Kalshi’s operations, following Nevada. A similar injunction in Massachusetts is currently on hold pending Kalshi’s appeal.
Kalshi has expressed its intention to comply with the ruling but stands firm on its assertion that it operates under federal regulations, not Michigan’s laws, and argues that its event contracts are not classified as sports betting.
“We’re not surprised by the state’s decision and will contest it in court,” stated Elisabeth Diana, Kalshi’s head of communications. “We will not be intimidated by entities interested more in safeguarding their monopolies than in protecting consumers. Meanwhile, we are implementing necessary restrictions.”
Nessel welcomed the court’s decision: “We are dedicated to maintaining fair competition among all gambling platforms in Michigan and ensuring that no company can evade responsibility or exploit consumers under the guise of prediction markets,” she noted in an official statement.
Concerns Surrounding Kalshi
Kalshi’s legal team previously sought to transfer the case to federal court, but US District Judge Paul Maloney asserted that federal regulations for commodities trading do not override Michigan’s gambling laws.
In a different federal case regarding prediction markets, Judge Maloney raised doubts about whether sports event contracts can be classified as financial derivatives, stating there is “no clear indication that Congress intended to bypass the states’ traditional role in managing gambling regulations.”
The ruling by Aquilina represents the latest development in a series of legal disputes nationwide concerning the regulation of sports contracts, a matter that could eventually reach the US Supreme Court.