In the latest chapter of the seemingly endless saga of prediction markets versus state-level regulation, a Michigan judge has temporarily blocked Kalshi, one of the world’s leading platforms, claiming that it violated state gaming law.
The document includes a financial fine if Kalshi refuses to comply. According to spokesperson Elisabeth Diana, the prediction markets operator will pursue an appeal.
What the State of Michigan Claims
The blockade was revealed on Monday, when Ingham County Circuit Court Judge Rosemarie Aquilina issued a Temporary Restraining Order, at the behest of Michigan Attorney General Dana Nessel and the Michigan Gaming Control Board.
The state argues that “Michigan and its most vulnerable citizens are suffering and will continue to suffer immediate and irreparable harm absent relief from being exploited by Kalshi's sports betting operation masquerading as an investment opportunity.‘’
The core of Michigan’s legal arguments relies on two main items.
- Age discrepancy: Michigan’s legalized gaming industry requires those who wish to place wagers to be 21 years old or older, while Kalshi allows people to use the platform beginning at age 18.
- Regulatory compliance: The order contends that Kalshi should operate under local gaming rules, claiming that ‘’Kalshi's failure to comply with Michigan gaming law gives it a massive and unfair advantage over the entities that comply with Michigan's regulatory structure, which greatly disrupts the industry.’’
In the document, the judge ordered the New York-based company to utilize a third-party geolocation service provider licensed by the state's gaming control board in order to comply with her restrictions.
In addition, Rosemarie Aquilina claims that she would fine Kalshi $120,000 for each day it does not comply with the geolocation requirements that the order imposes.
A New Chapter in an Old Battle
Kalshi is no stranger to jurisdictional friction. The temporary injunction makes Michigan the second state to implement a court-ordered ban on events contracts, following Nevada, where the Gaming Control Board sought a preliminary injunction which mandates that Kalshi must obtain state gaming license to offer wagering services. In Massachusetts, a similar court directive has been put on hold while the platform pursues an appeal.
In response, the company’s spokesperson Elisabeth Diana issued a statement saying that Kalshi plans to fight the decision in court. Diana claims that they are subject to the federal regulation of the Commodity Futures Trading Commission (CFTC), not to state-level decisions.
The Role of the CFTC and the Future of Prediction Markets
The CFTC has received support not only from companies like Kalshi, but also from President Donald Trump, who considers that a federal agency is the perfect tool for regulating a booming industry like prediction markets. The President has strongly backed the CFTC’s authority over the matter, claiming that no state-level lawmaker can go over the commission’s head.
This new legal battle comes after the CFTC has officially proposed a new rule book to regulate all prediction markets at a national level. The goal was to set a comprehensive framework for evaluating event contracts and prediction markets. Among other things, the proposal outlines a structured 90-day review process to scrutinize contracts involving sensitive topics like war, terrorism or unlawful activity.
Prediction markets claim that they operate differently from traditional gambling companies by allowing users to trade contracts against each other, not betting against ‘’the house’’. That’s why they insist on the necessity of a federal framework to ensure fair, regulated operations across the country. Despite facing numerous legal obstacles at state level, the industry continues to grow at an unprecedented rate.
