CFTC Overrides Michigan Court Order, Mandates KalshiEX Fulfill Pending Trades

The CFTC has directly overruled a Michigan state court order by staying KalshiEX's emergency rule change and ordering the prediction market operator to fulfill pending trades involving Michigan residents, according to a CFTC press release dated July 14, 2026. The move marks the first time a state has attempted to interfere directly with executed derivatives transactions, the CFTC said.

The conflict centers on a question of jurisdiction: whether a state court can force a federally-regulated derivatives clearinghouse to cancel trades after they have been executed. Michigan's order directed KalshiEX to cancel certain previously executed trades. The CFTC responded by invoking emergency authority under the Commodity Exchange Act to block that instruction and require fulfillment of the open trades in accordance with KalshiEX's normal practices.

CFTC Chairman Michael S. Selig framed the issue in stark terms. "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," according to the statement. DCM stands for designated contract market, CFTC parlance for a federally-registered derivatives exchange. Selig added: "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 cited its mandate under federal law to provide a uniform national market in derivatives transactions, with market participants having impartial access to CFTC-regulated markets and registered entities adopting transparent access criteria applied in a non-discriminatory manner. The regulator noted it is tasked with ensuring continued public confidence in derivatives markets by guaranteeing market resilience and predictability, including in the execution and clearing of transactions.

This action is not isolated. Michigan is the latest in a series of states to attempt to restrict or regulate CFTC-registered entities. The CFTC has filed lawsuits against Arizona, Connecticut, Illinois, Kentucky, Minnesota, New Mexico, New York, Rhode Island, and Wisconsin over enforcement actions against CFTC-regulated designated contract markets. The Commission 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 regarding state enforcement actions against CFTC-regulated entities.

Selig's statement included a warning directed at states: "The Commission will not allow states or state courts to bully registered entities into violating the Commodity Exchange Act and CFTC regulations." The CFTC's emergency action establishes a legal precedent that federal derivatives law overrides state court orders targeting executed transactions at federally-registered platforms, though the specific details of the Michigan court's reasoning and the number of trades or notional value at stake remain unreported.