Federal Market Supremacy
CFTC Orders Kalshi to Complete Trades, Affirming Federal Authority Over Prediction Markets
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Key Points
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The U.S. Court of Appeals for the District of Columbia Circuit denied the CFTC’s emergency motion for a stay in the Kalshi Congressional Control Contracts case, but the court left open the possibility for the agency to renew its stay request if new evidence emerges during the appeal.
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The CFTC has pursued enforcement actions beyond Michigan, filing lawsuits against nine states—Arizona, Connecticut, Illinois, Kentucky, Minnesota, New Mexico, New York, Rhode Island, and Wisconsin—to protect the federal jurisdiction and ensure uniform, non-discriminatory access to CFTC-regulated markets.
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CFTC Chair Michael S. Selig stated that 'a state cannot force a DCM to violate its obligations,' and warned that canceling already executed trades would cause cascading disruption and undermine contract certainty in the market.
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Michigan’s court order directed Kalshi to cancel certain previously executed trades involving Michigan residents, prompting the CFTC to stay Kalshi’s emergency rule change and order that open trades be fulfilled under Kalshi’s normal practices.
The U.S. Commodity Futures Trading Commission has blocked prediction market platform Kalshi from canceling trades in Michigan, defying a state court order that directed the company to unwind previously executed deals involving Michigan residents. The CFTC stepped in, staying Kalshi's emergency rule change and ordering the platform to fulfill all open trades under its normal practices, according to 740thefan.com.
CFTC Chair Michael S. Selig warned that allowing a state to override already-executed trades would cause 'cascading disruption' and undermine contract certainty across the market. The standoff marks a rare and direct clash between a state court and a federal financial regulator over who controls derivatives trading.
Michigan's Court Order Sparked the Federal Showdown
Michigan issued a court order telling Kalshi to cancel certain trades already made by Michigan residents. That move was unusual. States rarely try to unwind trades that have already been executed on a federally regulated platform. The CFTC moved quickly in response, issuing its own order to freeze that rule change and keep trades in place, according to wdez.com.
The CFTC argued that the Commodity Exchange Act requires a single, uniform national derivatives market. It also requires non-discriminatory access — meaning every trader, no matter what state they live in, must be treated the same. Selig said plainly: 'A state cannot force a DCM to violate its obligations.' DCM stands for Designated Contract Market, which is what Kalshi operates as.
CFTC Sues Nine States to Lock In Federal Authority
Michigan is not the only state the CFTC is fighting. The agency has filed lawsuits against nine states: Arizona, Connecticut, Illinois, Kentucky, Minnesota, New Mexico, New York, Rhode Island, and Wisconsin. All nine cases center on the same core argument — federal law governs derivatives markets, not state regulators, according to katcountry989.com.
The CFTC says letting states block or cancel trades on federally licensed platforms would break the national market system. Each state acting differently would create chaos for traders and platforms alike. The agency's goal is to set one clear rule that applies everywhere in the country.
D.C. Circuit Rejects CFTC Stay on Congressional Contracts Case
In a separate but related case, the U.S. Court of Appeals for the District of Columbia Circuit denied the CFTC's emergency request to pause Kalshi's Congressional Control Contracts. These are prediction market bets on which party will control Congress. The court turned down the stay but left open the option for the CFTC to renew its request if new evidence appears during the appeal, according to whbl.com.
That case raises a bigger question: what counts as a legal event-based trade? The CFTC had tried to block those contracts, but Kalshi fought back in court and won that round. The two disputes together show how unsettled the rules around prediction markets still are.
What This Means for Prediction Markets Going Forward
Kalshi is one of the only federally licensed prediction market platforms in the U.S. It lets users bet real money on the outcomes of events like elections and legislation. The fights with Michigan and other states signal that prediction markets have grown big enough to trigger real regulatory battles, according to 740thefan.com.
The CFTC's hard line sends a clear message to states: once a trade is done on a federally regulated platform, states cannot force it to be undone. The outcome of these cases could shape how prediction markets operate for years. If the CFTC wins, federal rules will firmly override state attempts to intervene in these markets.
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