Trump regulator orders Kalshi to defy Michigan court – escalating battle over prediction markets
Federal Agency Challenges State Court in Prediction Market Dispute
Trump regulator orders Kalshi to defy – The Trump administration has launched an unprecedented move to strengthen its campaign against state-level oversight of prediction markets—platforms where participants wager on real-world occurrences ranging from athletic competitions to political outcomes and entertainment events. The Commodity Futures Trading Commission, the federal body responsible for supervising these markets, issued a directive to Kalshi instructing the platform to maintain pending athletic transactions within Michigan. This instruction directly contradicted a mandate issued by a local judge.
Emergency Powers Revived After Decades
In an unusual application of authority, the CFTC invoked emergency powers that have remained dormant since President Jimmy Carter utilized them during 1980 to impose a grain embargo on the Soviet Union amid Cold War tensions. Robert Schwartz, who previously served as the agency’s general counsel, noted the historical significance of this action. “This hasn’t happened in 46 years,” Schwartz explained regarding the CFTC’s deployment of emergency authorities. He characterized the move as “an assertion of federal power in financial markets like we haven’t seen so far, by countermanding a court order.”
Kalshi had already begun implementing the judge’s requirements when the federal intervention occurred. The company reported that the quantity of trades affected by this reversal was modest in scale. Consequently, the immediate legal conflict may now be resolved, though the episode represents the most forceful action taken by the CFTC to date in resisting state attempts to control prediction market operations.
Kalshi Responds to Federal Intervention
Kalshi’s enforcement leadership expressed frustration with the federal directive. Bobby DeNault, the company’s head of enforcement, communicated the organization’s perspective through a statement on X on Tuesday evening. “We are disappointed by this decision and believe it is unfair to Kalshi,” DeNault wrote. He further explained the dilemma facing the platform: “We are being put in an impossible position, looking to follow state court orders that may contradict our federal regulatory obligations.”
Legal representatives for Kalshi informed the Michigan judge of these developments on Friday. They confirmed that the company “remains in compliance” with the judicial directive to reverse athletic transactions, even as the CFTC instructed otherwise. The attorneys emphasized that “no mechanism to reinstate” the trades exists, meaning the transactions “will remain liquidated and refunded.”
Broader Context and Industry Implications
A source acquainted with the CFTC’s internal deliberations indicated that the agency’s primary objective was preventing what it considers a harmful precedent from affecting pending litigation in additional states. “This isn’t about Kalshi and it certainly wasn’t to help them,” the source told CNN, noting that the decision “makes their life harder, in this case.”
The CFTC’s stance aligns with President Donald Trump’s supportive position toward prediction markets, which have experienced remarkable growth throughout the current year. The agency has initiated legal proceedings against multiple states attempting to impose regulations on these platforms while simultaneously withdrawing Biden-era recommendations that would have prohibited certain categories of transactions. Trump’s administration has also strengthened the CFTC’s leadership by retaining Michael Selig, his sole appointee, as the commission’s chair.
Meanwhile, the CFTC is examining whether Gabriel Perez, a White House teleprompter operator, engaged in potential insider trading related to markets tracking Trump’s public addresses. The White House confirmed that Perez is cooperating with investigators and has been placed on unpaid administrative leave.
Legal Classification Debate Continues
Under existing American legislation, prediction platforms are classified as financial markets offering “event contracts” rather than gambling establishments. These markets operate similarly to futures trading, though participants bet on outcomes such as elections, the World Cup, award ceremonies, and weather patterns instead of commodities.
However, Michigan and forty additional states maintain that prediction platforms constitute gambling and function illegally without proper state gaming licenses. Michigan Attorney General Dana Nessel, a Democrat, initiated legal action against Kalshi in March. Last month, Ingham County Circuit Judge Rosemarie Aquilina sided with Nessel, concluding that Michigan citizens “were being exploited by Kalshi’s sports betting operation masquerading as an investment opportunity.” Her ruling required Kalshi to suspend its athletic markets within the state and void existing sports-related wagers.
CNN maintains a partnership with Kalshi and incorporates the platform’s data into its coverage of significant events. The network’s editorial staff members are prohibited from participating in prediction market transactions.