GoCheckMyCrypto.comCFTC orders KalshiEX to honor trades a Michigan state court directed it to cancel
The CFTC invoked emergency authority on July 14 to order KalshiEX, a federally regulated prediction market exchange, to honor executed trades despite a Michigan state court directing cancellation. The clash represents the first time a state has attempted to void executed derivatives transactions and marks an escalation in the jurisdictional battle over prediction markets.
The CFTC invoked emergency authority on July 14 to order KalshiEX, a designated contract market operating under federal oversight, to honor executed prediction market trades despite a Michigan state court directing cancellation, according to The Defiant. The clash marks the first instance of a state attempting to void executed derivatives transactions and signals a direct conflict between federal derivatives jurisdiction and state judicial power.
CFTC Release Number 9267-26 stayed an emergency rule change by KalshiEX and ordered the exchange to fulfill open trades in accordance with normal practices, per The Defiant. KalshiEX operates as a designated contract market (DCM) under CFTC oversight. The Michigan court had directed KalshiEX to cancel previously executed trades involving Michigan residents, according to The Defiant, but the CFTC's order blocked that directive.
CFTC Chairman Michael S. Selig stated in the order, per The Defiant: "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. 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 CFTC described Michigan as the first state to attempt to interfere directly with executed derivatives transactions.
This action is part of a broader CFTC effort to assert exclusive jurisdiction over prediction markets. The CFTC has filed lawsuits against Arizona, Connecticut, Illinois, Kentucky, Minnesota, New Mexico, New York, Rhode Island, and Wisconsin to protect jurisdiction Congress granted it, according to The Defiant. The agency has also filed amicus briefs in the U.S. Court of Appeals for the Sixth and Ninth Circuits and the Supreme Judicial Court of Massachusetts, and has sued Kentucky and New Mexico specifically to assert exclusive authority over the prediction market sector. The DOJ and CFTC have moved to block Arizona's enforcement action against Kalshi.
The Michigan ruling represented an unprecedented assertion of state authority: no state had previously ordered cancellation of executed trades on a federally regulated derivatives exchange. The CFTC's emergency stay asserts that federal law does not permit DCMs to discriminate against residents of particular states, and that states cannot compel federally regulated exchanges to break federal obligations.
CFTC Release Number 9267-26 ordered KalshiEX to fulfill open trades in accordance with normal practices, directly overriding the Michigan state court directive, per The Defiant's reporting.
The outcome is a direct federal assertion of preemption: states cannot void executed trades through their courts, and the CFTC will defend DCM autonomy where federal jurisdiction applies. Watch the status of the CFTC's lawsuits against the other eight states and whether any appeal the Michigan court decision or challenge the CFTC's emergency authority. The premise holds only if federal courts uphold the CFTC's preemption argument in the pending state litigation.
And that's the way it is.
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