The U.S. Commodity Futures Trading Commission ordered KalshiEX, LLC to fulfill trades that a Michigan state court had directed the prediction-market operator to cancel, escalating a fight over whether states can reach into federally regulated derivatives venues.
In Release Number 9267-26, dated July 14, the CFTC said it stayed an emergency rule change that KalshiEX had proposed in response to a Michigan court order directing the company to cancel certain previously executed trades involving Michigan residents. The agency said it also exercised its emergency authority to order KalshiEX to fulfill the open trades in accordance with its normal practices.
Kalshi operates as a designated contract market, or DCM, under CFTC oversight. The order pits the federal derivatives regulator against a state court that had told the exchange to unwind wagers.
"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," Chairman Michael S. Selig said in the release. "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 Commission will not allow states or state courts to bully registered entities into violating the Commodity Exchange Act and CFTC regulations."
