Prediction markets operator Kalshi was ordered to cease operations in Michigan by the state’s attorney general on Monday.
AG Dana Nessel (D) said that her office received a two-week restraining order against Kalshi due to the operator violating Michigan’s Lawful Sports Betting Act. That goes against the core principle of prediction platforms, who argue that their event contracts are distinctly different from sports betting.
Why was Kalshi banned in Michigan?
Atty. Gen. Nessel confirmed the triumph in court in a social media post on Monday evening.
Kalshi responded to Nessel’s announcement of the temporary restraining order by saying it disagreed with the judge’s decision. It also said that it would fight the restraining order in court, adding another legal battle to its growing ledger.
“Our gambling laws exist to protect Michiganders from unlicensed, predatory operations, and failing to comply with them carries serious legal consequences,” Nessel said. “I am proud of the attorneys in my office who not only kept this case in state court but also secured an order protecting residents as this litigation moves forward.
Nessel first sued Kalshi on behalf of Minnesota in March. The crux of its argument was that Kalshi, in allowing customers to win or lose money with purchased outcomes associated with sports events, acted as an unlicensed sports betting operator.
Kalshi unsuccessfully attempted to have the case moved to a federal court last week.
“We remain committed to enforcing a level playing field for all gambling platforms in Michigan and ensuring that companies cannot evade accountability or exploit consumers under the guise of a prediction market.”
Another legal squabble
With Kalshi facing temporary restriction in Michigan, it is now live in only 48 states. Nevada temporarily banned the platform back in March, also for acting as a supposed unlicensed sports betting operator.
Those decisions and the growing confidence of state officials who take issue with prediction platforms are strongly juxtaposed by the extraordinary growth that operators have seen. According to Yahoo Finance, Kalshi processed more than $17 billion in transactions during the first two weeks of the World Cup, and generated more than $10 million in daily fees.
Both sides of that coin illustrate why prediction markets have garnered so much attention from state and federal officials.
Elsewhere in the country, Kalshi on Monday filed a lawsuit against Illinois after a new budget plan required the platform to obtain a $15 million sports betting license and pay a share of taxes to the state. It is also suing Minnesota over a law that was passed in May that enacted a sweeping ban on prediction operators.
The Commodity Futures Trading Commission (CFTC), the federal body in charge of regulating licensed prediction operators, is also engaged in litigation with several states on behalf of its operators. The most recent example of that is in Kentucky, which approved a bill to implement excise taxes for prediction markets.
The Trade Handle Prediction Markets Take
Anyone who has followed the rise of prediction markets, and the ensuing legal battles, should not find it surprising that there is an increasing amount of resistance. The merits of both sides are well-founded, and a Supreme Court case feels almost inevitable, unless the increasingly-stubborn CFTC changes its tune. It also may be worth it for Kalshi to continue engaging in litigation until a resolution is reached, given its continued national growth.