The Commodity Futures Trading Commission (CFTC) negated a Michigan court order that canceled trades on Kalshi. According to a statement by the CFTC, it exercised its authority to order Kalshi to fulfill open trades.
CFTC Chairman Michael Selig said a state cannot force a Designated Contract Market (DCM) to violate its obligations and discriminate against state residents.
“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.”
The action by the state of Michigan and the CFTC’s response are emblematic of the ongoing legal battle between federal oversight and attempts by certain states to usurp federal regulatory authority over prediction markets.
The CFTC has filed lawsuits against the states of Arizona, Connecticut, Illinois, Kentucky, Minnesota, New Mexico, New York, Rhode Island, and Wisconsin.
The CFTC has also filed amicus briefs in the US Court of Appeals for the Sixth and Ninth Circuits and the Supreme Judicial Court of Massachusetts.
While states believe they should have the final word, with many asserting prediction markets fall under gaming rules, a state-based regulatory regime would crush the innovation that prediction markets have brought to the country.
The CFTC stated that it holds a responsibility to ensure public confidence in derivatives markets by guaranteeing market resilience and predictability.
