Trump CFTC Orders Kalshi to Defy Michigan Court

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The Trump administration's commodities regulator has directed prediction-market exchange Kalshi to ignore a state court injunction, igniting a constitutional clash over federal versus state authority over a fast-growing $22 billion financial platform.

Lead

The Commodity Futures Trading Commission, under Trump-appointed Chairman Michael Selig, issued an emergency order on July 14, 2026, directing KalshiEX to disregard a Michigan circuit court's temporary restraining order — invoking statutory authority last exercised in 1980 during President Jimmy Carter's grain embargo against the Soviet Union. The intervention escalates a multi-state legal war over prediction market regulation into a direct confrontation between federal and state judicial authority.

What Happened

Michigan's 30th Judicial Circuit Court Judge Rosemarie E. Aquilina granted a temporary restraining order against Kalshi on June 29, barring the platform from offering, advertising, or facilitating sports event contracts to Michigan residents. The order imposed fines of $120,000 per day for initial noncompliance, subsequently raised to $500,000 daily if the company failed to deploy third-party geolocation technology to block Michigan users.

Facing those penalties, Kalshi filed an emergency rule with the CFTC on July 12, proposing to force-liquidate Michigan residents' open positions at prevailing market value, with the company absorbing any resulting losses.

The CFTC's response was categorical. Chairman Selig stayed Kalshi's emergency rule outright and ordered the firm to continue fulfilling pending trades normally. The agency's rationale: under the Commodity Exchange Act, federal law grants the CFTC exclusive jurisdiction over designated contract markets, meaning a state court cannot compel a federally licensed exchange to discriminate against any state's residents. "A state cannot force a DCM to violate its obligations," the CFTC order stated.

The Kalshi vs CFTC Backstory — Now Reversed

The phrase Kalshi vs CFTC once described a different battle. In 2023, the CFTC under prior leadership banned Kalshi from listing election-outcome contracts, classifying them as unlawful gaming. A federal judge vacated that ban in September 2024, and the agency dropped its appeal in May 2025 after the Trump administration took office. The regulatory dynamic has since inverted: the CFTC now functions as Kalshi's primary legal shield against state regulators.

Trump Administration's Role

President Trump anchored the administration's position publicly in late May, posting on Truth Social that it was "critically important that the CFTC's exclusive authority over Prediction Markets is maintained." He castigated state attorneys general and governors pursuing actions against Kalshi by name. The White House's Office of Information and Regulatory Affairs simultaneously began reviewing a proposed CFTC rule on prediction markets submitted May 26, signaling a push toward a permanent federal framework for event contracts spanning elections, gaming, and sports.

Chairman Selig, confirmed as the CFTC's 16th chairman on December 22, 2025, had designated prediction markets alongside cryptocurrency as the twin pillars of his regulatory agenda in his first public remarks on January 29, 2026.

Legal Firestorm Across Six States

The Kalshi court order from Michigan is one front in a six-state campaign. Massachusetts obtained a preliminary injunction in January 2026. Nevada's Supreme Court denied Kalshi an emergency motion in early July and threatened contempt charges. Minnesota held oral arguments before a state court in early July. Ohio courts are weighing a Kalshi-initiated suit. New Jersey's dispute, in which the Third Circuit ruled in April 2026 that sports event contracts qualify as federally regulated swaps — the first federal appellate ruling on the question — is heading toward the U.S. Supreme Court. Justice Samuel Alito has set August 4 as the deadline for New Jersey to file its certiorari petition.

What Comes Next

The Michigan standoff leaves two judicial authorities issuing conflicting directives to the same company, a collision that legal analysts say is likely to produce either a contempt showdown in Michigan or an expedited federal intervention. The New Jersey Supreme Court petition, in the case Flaherty v. KalshiEX, would represent the first opportunity for the nation's highest court to define the jurisdictional boundary between federal commodities law and state gambling statutes — a ruling with broad implications for the $17-billion-per-month prediction market industry.

Outlook

The CFTC's unprecedented invocation of emergency authority reflects the Trump administration's resolve to treat prediction market regulation as an exclusively federal domain, foreclosing state-level enforcement. Whether courts — including, ultimately, the Supreme Court — affirm that position will determine whether platforms like Kalshi can operate nationally under a single federal license or face a patchwork of state restrictions. A Supreme Court ruling against federal preemption could fragment the market; one endorsing it would cement prediction markets as a permanent fixture of the U.S. financial system under CFTC oversight.