Michigan Court Blocks Kalshi Sports Contracts With $500,000-a-Day Penalty

Tags: Kalshi, Michigan Attorney General, Michigan Gaming Control Board, CFTC, sports event contracts

market_platform: Kalshi

category: Regulation

Michigan won a preliminary injunction blocking KalshiEX LLC from offering sports event contracts to people physically located in the state, with violations carrying a $500,000-per-day penalty. Ingham County Circuit Court Judge Rosemarie Aquilina signed the order on September 1, 2026, according to the Michigan Attorney General’s September 2 announcement.

What did the Michigan court order Kalshi to do?

The order in Nessel v. KalshiEX LLC, No. 26-001087-CZ, requires Kalshi to use third-party geolocation-based geofencing to block access to sports event contracts from within Michigan. It also prohibits the company from offering, marketing, advertising, promoting, or soliciting those contracts to Michigan residents while the litigation continues, according to the Michigan Attorney General’s office.

The $500,000 daily penalty increases the financial exposure from the temporary restraining order Aquilina issued on June 29, 2026. That earlier order carried a $120,000-per-day fine and first halted Kalshi’s sports offerings in Michigan, according to the attorney general’s announcement and Michigan Gaming Control Board statements.

The preliminary injunction keeps the state-law restrictions in place while the case proceeds. For Kalshi, the practical effect is a court-backed requirement to block sports event-contract access in Michigan and avoid marketing those contracts to Michigan residents during the litigation.

What is Michigan’s case against Kalshi?

Michigan Attorney General Dana Nessel announced the case on March 5, 2026, after the complaint was filed in Ingham County Circuit Court on March 3. The state alleges that Kalshi’s sports event contracts function as sports wagers under Michigan law and that Kalshi has been operating without a license from the Michigan Gaming Control Board.

The complaint cites Michigan’s Lawful Sports Betting Act, including MCL 432.409(2), and argues that Kalshi cannot avoid state gambling law by describing the product as federally regulated event contracts. The state also says Kalshi allows users as young as 18 to trade sports contracts, below Michigan’s 21-year minimum for legal sports betting, and does not provide the responsible gambling safeguards required of licensed sportsbooks.

Michigan’s filings and public statements also frame the case as a licensing and tax dispute. Nessel’s office says unlicensed sports betting activity bypasses revenue streams tied to schools, gambling addiction prevention, economic development, and first responders. The Michigan Gaming Control Board has separately emphasized the effect on licensed operators, including tribal gaming interests that operate under state and tribal regulatory frameworks.

Henry Williams, executive director of the Michigan Gaming Control Board, has argued in state statements that Kalshi’s sports contracts should be treated as sports betting, not investing. Williams has also warned that business entities involved in offering Kalshi’s sports event contracts in Michigan could face licensing consequences in the state.

Nessel is seeking a permanent injunction and an order treating the challenged activity as a common law nuisance. “Corporations cannot circumvent state gaming laws,” Nessel said when announcing the lawsuit. “My office will hold those who sidestep Michigan’s consumer protections accountable.”

How does Kalshi defend its sports contracts?

Kalshi’s core defense is federal preemption. The company argues that its contracts are financial derivatives listed on a federally registered exchange overseen by the Commodity Futures Trading Commission, not sports wagers subject to state-by-state sportsbook licensing.

Kalshi head of communications Elisabeth Diana said after the Michigan injunction that “Kalshi is subject to exclusive federal jurisdiction. We won’t be bullied.” That position tracks the company’s broader legal strategy in state disputes over sports event contracts: Kalshi says federal commodities law gives the CFTC exclusive authority over designated contract markets and the products they list.

The Michigan case tests where that federal authority ends. State officials argue that CFTC registration does not give an exchange permission to offer sports betting products in a state that regulates or prohibits them. Kalshi argues that allowing states to block federally listed event contracts would fracture national derivatives markets and interfere with the Commodity Exchange Act’s treatment of designated contract markets.

What did the CFTC do in July?

The CFTC took a separate emergency action on July 14, 2026, tied to Kalshi’s federally regulated exchange obligations after the Michigan court dispute affected previously executed trades involving Michigan residents. In CFTC Release No. 9267-26, the agency said it had directed Kalshi to comply with its obligations as a designated contract market after a Michigan state court order required cancellation of certain trades.

The agency said the Commodity Exchange Act requires registered exchanges to provide impartial access to their markets. The CFTC’s release framed the emergency action as necessary to preserve market integrity and ensure that trades already executed on a CFTC-regulated market were handled through normal clearing and settlement processes.

Nessel’s office criticized the federal intervention, saying it undermined state efforts to regulate online sports betting and enforce state tax law. Aquilina later issued the September 1 preliminary injunction with the CFTC action already part of the broader conflict between federal derivatives regulation and state gambling enforcement.

Why does the Michigan order matter outside the state?

Michigan is one front in a broader state challenge to sports event contracts. Nevada moved against Kalshi sports contracts in 2025. Massachusetts Attorney General Andrea Joy Campbell filed a lawsuit against Kalshi in September 2025, and a Massachusetts court order was announced on January 20, 2026. New York filed its own suit in July 2026.

New Jersey has separately petitioned the U.S. Supreme Court on the broader question of whether states can regulate CFTC-approved event contracts as gambling. Together, those disputes put pressure on the same legal question from multiple directions: whether federally regulated event-contract exchanges can offer sports markets nationwide without state gaming licenses.

The answer matters for prediction-market exchanges and incumbent gambling regulators alike. If Kalshi’s preemption theory prevails, CFTC-registered exchanges could list sports event contracts nationally without obtaining sportsbook licenses in each state. If state regulators prevail, sports event contracts may face a licensing map closer to online sports betting, with access determined state by state rather than through a single federal market structure.

That split would affect more than Kalshi. Any exchange seeking to list sports event contracts would have to weigh the benefits of a national CFTC-regulated order book against the risk of state enforcement, geofencing obligations, and separate litigation in major betting markets.

What happens next in Michigan?

The preliminary injunction keeps Kalshi’s sports event contracts off limits to people physically located in Michigan while Nessel v. KalshiEX LLC continues in Ingham County Circuit Court. The current order requires geofencing and bars marketing or solicitation to Michigan residents, backed by the $500,000-per-day penalty announced by the attorney general’s office.

The next phase of the case will determine whether Michigan’s sports betting law can be applied to Kalshi’s federally listed contracts. The operative date is September 1, 2026, when the court signed the preliminary injunction that turned Michigan’s temporary restrictions into a higher-penalty order for the remainder of the litigation.