US Regulatory Dispute: CFTC Forces Kalshi to Honor Michigan Trades Amid State Conflict

An unprecedented conflict is erupting in the United States. On July 15, 2026, the Commodity Futures Trading Commission (CFTC) mandated the prediction market operator Kalshi to honor certain trades made by Michigan residents. This directly contradicts a state court order in Michigan to cancel and refund these trades. The incident serves as a stark illustration of the growing tension between federal regulation and individual state legislation concerning financial betting, particularly in what are known as prediction markets.

At the heart of the dispute is the question of who has ultimate authority over the regulation of prediction markets: the federal government or individual states. The CFTC sees itself as the sole authority responsible for ensuring a uniform national market for derivatives transactions. The state level, in this case Michigan, is attempting to prohibit certain prediction markets and reverse transactions that have already occurred.

Numbers and facts

The dispute began with a temporary restraining order issued by the Ingham Circuit Court in Michigan on June 29. This order prohibited Kalshi from offering sports contracts in the state. On July 6, the court clarified that certain trades entered into by Michigan residents must be "voided, cancelled and refunded." In response, Kalshi submitted an emergency rule filing on July 12 that would have forced liquidation of certain positions and refunded affected Michigan customers. The CFTC, however, rejected this filing and directed the exchange to fulfill the trades "in accordance with its normal practices." This marks the first time the CFTC has used its emergency powers to counteract a state court-driven effort to unwind executed prediction market trades. Robert DeNault, Head of Enforcement at Kalshi, expressed disappointment on X, stating that they had already unwound the trades as instructed by the Michigan court.

"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." - Michael Selig, CFTC Chairman

Background

This latest conflict is not an isolated incident. The CFTC has already sued multiple states over their efforts to regulate or ban federally designated contract markets. Additionally, the CFTC has filed amicus briefs supporting exchanges in several cases. However, until now, no state court had gone so far as to unwind already executed prediction market trades. The CFTC views this as a potential threat to the integrity of the entire market. Selig emphasized that canceling trades already executed is an "unprecedented step" that risks a "cascading effect on the entire marketplace" and undermines the necessary "certainty in contracting." Kalshi's position, caught between state and federal directives, is difficult. Although the company pledged to absorb the losses from the annulled trades itself to protect the interests of all market participants, its filing was rejected by the CFTC. The clash highlights a fundamental disagreement over the interpretation of federal laws and state sovereignty, which could have far-reaching consequences for the future of prediction markets in the U.S. The state of Michigan has maintained its ban on Kalshi's sports contracts and an August 12 geofencing deadline, but the conflict is escalating. The CFTC has thus opened a new front in its battle with states over the future of prediction markets.

Why it matters for German players

The conflict in the U.S. has direct implications for the general perception and regulation of online gambling, including in Germany. Although German players are not directly affected by a dispute between the CFTC and Michigan, this illustrates the complexity and necessity of clear regulation. In Germany, the State Treaty on Gambling 2021 (GlüStV 2021) provides a uniform legal framework. Players benefit from strict protection mechanisms that are not always in place in the U.S. The Joint Gambling Authority of the Federal States (GGL) licenses and supervises online casinos that adhere to the rules. These include, among other things, a stake limit of 1 Euro per game round for slot machines and a monthly deposit limit of 1,000 Euro via the LUGAS system. This system ensures that players remain disciplined and do not gamble beyond their means. In contrast to the unclear jurisdictions in the U.S., Germany offers a high degree of legal certainty and player protection with the GGL and GlüStV 2021. Therefore, anyone playing in a GGL-licensed online casino in Germany can rely on clear rules.

What it means for GGL-licensed casinos

For GGL-licensed casinos, there is a clear legal situation that avoids jurisdictional conflicts like those in the U.S. The GlüStV 2021 sets clear limits and obligations. The GGL, as the supervisory authority, ensures that these requirements are consistently met. This provides planning security for providers and confidence for players. While Kalshi in the U.S. is caught between a rock and a hard place, German online casinos with a GGL license operate in a stable and transparent environment. Systems like LUGAS, which monitors deposit limits, are not established for prediction markets in the U.S. This security for players and operators is a decisive advantage of the German regulatory system.