CFTC Blocks Kalshi Rule That Would Have Canceled Michigan Residents' Trades

The CFTC stayed a Kalshi emergency rule that would have canceled Michigan residents' event-contract trades and ordered Kalshi to honor those trades.

The CFTC stated that Kalshi's event contracts are swaps under federal law and that the agency has exclusive jurisdiction over swaps traded on a designated contract market.

A Michigan circuit court granted the state a temporary restraining order that (i) bars Kalshi from offering Internet sports betting to people in Michigan, (ii) requires geolocation controls, and (iii) sets a $120,000 daily fine. The CFTC reported that the circuit court later told Kalshi to void, cancel, and refund trades that Michigan residents had already completed.

To comply, Kalshi filed an emergency rule with the CFTC to force-liquidate the Michigan users' open positions at market value and cover any shortfall from Kalshi's own funds. The CFTC stayed that rule and directed Kalshi to fulfill the trades as it normally would.

The agency claimed that it has exclusive federal authority over Kalshi's contracts, which a state court cannot override, calling the Michigan court's order to unwind completed trades unprecedented. The CFTC noted that canceling settled trades would shake confidence in the market, since participants must be able to trust that a completed trade will stand.