CFTC Overrides Michigan Court Order, Orders KalshiEX to Fulfill Pending Trades

The CFTC has directly countermanded a Michigan state court order by staying an emergency rule change at prediction market KalshiEX and ordering the platform to fulfill pending trades, escalating a fundamental conflict over regulatory authority between federal and state governments.

Michigan's state court had ordered KalshiEX to cancel previously executed trades involving Michigan residents. In response, KalshiEX proposed an emergency rule change. The CFTC, asserting it holds emergency authority under federal derivatives law, stayed that rule change and ordered the platform to fulfill the open trades in accordance with its normal practices, per the CFTC's announcement.

CFTC Chairman Michael S. Selig framed the decision 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." He added that "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," according to the CFTC press release.

The Commodity Exchange Act requires the CFTC to maintain a uniform national market in derivatives transactions, with market participants entitled to impartial access to CFTC-regulated markets and registered entities required to adopt transparent access criteria applied without discrimination, the CFTC stated. The agency characterized Michigan as the first state to attempt direct interference with executed derivatives transactions.

The clash reflects broader regulatory friction. The CFTC has filed lawsuits against nine states: Arizona, Connecticut, Illinois, Kentucky, Minnesota, New Mexico, New York, Rhode Island, and Wisconsin, over enforcement actions against CFTC-regulated derivatives clearing markets. 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 on related jurisdictional questions, per the release.

The CFTC's invocation of emergency authority to override a state court order marks an unusual assertion of federal power. The sources do not disclose the specific statutory language or legal test under which the CFTC claims this emergency authority, leaving the scope and precedential weight of the power undefined. Neither the CFTC statement nor available sources address whether Michigan will challenge the order, seek further court intervention, or appeal on federalism grounds.