Michigan: Court Extends Kalshi Sports Contracts Ban, Threatens Escalated Fines

A Michigan judge has extended a temporary order prohibiting Kalshi from offering sports contracts in the state, potentially leading to significantly increased fines. Ingham County Circuit Court Judge Rosemarie Aquilina ruled at a hearing that the ban she ordered last month should remain in place. Kalshi has been fighting the order but has agreed to comply with its terms by blocking all users with Michigan addresses from its sports contracts. However, the latest ruling mandates that Kalshi implement geoblocking solutions to identify if individual users are physically located in Michigan.

Should Kalshi fail to implement these solutions, the company faces substantial penalties from August 12. Aquilina has set daily fines at $0.5 million, a significant increase from previous threats. The legal landscape in the US surrounding so-called prediction markets remains tense and complex.

Numbers and facts

Judge Aquilina will impose daily fines of $0.5 million if Kalshi fails to fully implement geoblocking solutions by August 12. This represents a 317% increase in her previous fine threats for non-compliance. Kalshi has already stated it will appeal the court's verdict. Meanwhile, the federal regulator, the Commodity Futures Trading Commission (CFTC), has initiated multiple lawsuits against states, alleging that Kalshi and its competitors provide unregistered sports betting services. So far, nine states face legal action. The CFTC, under its Chairman Michael Selig, argues that prediction market contracts are financial instruments, meaning only the Commission has the power to regulate them.

Background

Kalshi had previously committed to blocking users with known Michigan addresses from its services. The current decision, however, goes further. Kalshi must now ensure that no one physically located in Michigan can access its betting offerings. The company assured the court it is working with a third-party provider, GeoComply, to implement these geoblocking solutions. However, they and their partners needed more time for integration and testing.

Attorneys for the state accused Kalshi of stalling tactics, suggesting the company was trying to gain time until the end of the World Cup. In Nevada, another state facing similar issues, there have been mixed results with geoblocking. Nevada gambling regulators claim Kalshi's geolocation solutions either do not function correctly or are not being implemented. Residents of the Silver State can easily bypass geoblock bans using common workarounds such as commercially available virtual private network (VPN) software. Critics have also accused Kalshi of using cheap in-house geolocation solutions rather than investing more in superior third-party products. Furthermore, Judge Aquilina reiterated her assertion that Kalshi offers gambling services, not mere financial instruments.

“What you’re doing is defining it in a way that works for you, but not for Michigan,” she said.

The court is scheduled to reconvene on July 20. This conflict between states and the CFTC is escalating. A compromise solution seems unlikely, according to legal experts. Instead, intervention from Congress or the Supreme Court is hoped for to untangle the messy situation. Law professor Melinda Roth believes there can be coexistence between sports betting and prediction markets. She also makes it clear:

“Anyone who thinks they can predict how SCOTUS might rule on this is not being realistic.”

Most of it will depend on the Supreme Court's (SCOTUS) eventual decision.

Why it matters for German players

This development in Michigan has no direct impact on German players. The German online gambling market is clearly regulated by the State Treaty on Gambling 2021. Gambling with a license from the Joint Gambling Authority of the Federal States (GGL) is legal and safe in Germany. This is a very different situation. Germany has strict requirements for providers, especially regarding player protection and the clear separation of financial markets and gambling. I strongly advise German players to exclusively play with providers holding a GGL license. MGA or Curacao licenses do not offer the same level of protection as German regulation. There are many reputable offerings in Germany that ensure a safe gaming experience.

What it means for GGL-licensed casinos

For casinos holding a German license from the Joint Gambling Authority of the Federal States (GGL), such discussions are irrelevant. The GGL clearly distinguishes between gambling and financial bets or so-called prediction markets. In Germany, there are no grey areas like in the USA, where the definition of “gambling” and “financial instrument” repeatedly leads to legal disputes. GGL-licensed providers must adhere to clear, unambiguous rules enacted for player protection. Anyone wishing to operate legally in Germany must submit to GGL regulations. This includes extensive protective measures, betting limits, and no products that could be misunderstood as financial bets. The latest developments in Michigan once again demonstrate the importance of clear regulatory frameworks to protect consumers and avoid legal uncertainty. German-licensed casinos benefit from this clarity.