Kalshi's legal fight with the states has added another significant setback. A Michigan judge has ordered the prediction market exchange to keep its sports event contracts unavailable in the state, with potential fines of $500,000 for each day it fails to comply. The preliminary injunction means Kalshi must maintain geofencing while Michigan's broader case against the company continues.
Ingham County Circuit Court Judge Rosemarie Aquilina signed the order on Sept. 1, replacing a temporary restraining order issued earlier this summer. Michigan Attorney General Dana Nessel first sued Kalshi in March, arguing that its sports contracts violate state law because the exchange lacks approval from the Michigan Gaming Control Board. Kalshi maintains that its event contracts fall under federal commodities law and CFTC oversight.
Michigan Draws a Firm Line Around Sports Contracts
The injunction goes well beyond simply telling Kalshi to turn off a few markets. It prevents the company from offering, listing, executing, or settling covered sports contracts for people located in Michigan. Kalshi must also use a third-party geolocation provider licensed by the Michigan Gaming Control Board to enforce the restrictions.
The order covers several popular types of sports markets, including:
- Moneyline contracts
- Parlay contracts
- Over-under contracts
- In-game contracts
- Proposition contracts
Kalshi also faces restrictions involving deposits, account funding, and advertising to Michigan residents. Within three business days, it must provide the court order to futures commission merchants that offer its sports contracts. The $500,000 daily penalty gives Kalshi plenty of incentive to make sure those geofences work.
Worth A Read: Prediction Markets Are About to Have a Geofencing Problem
The Same Regulatory Fight Keeps Spreading
Michigan's case comes down to the question now hanging over much of the prediction market industry. Kalshi operates as a federally regulated designated contract market and argues that the Commodity Exchange Act gives the CFTC authority over its event contracts. States including Michigan contend that sports-related products still fall within their own regulatory authority.
Kalshi initially moved the Michigan lawsuit to federal court, but the case was sent back to Ingham County Circuit Court. Aquilina issued a temporary restraining order in June that included geolocation requirements and potential penalties of $120,000 per day. The new preliminary injunction raises those potential penalties considerably and remains in place until a final order in the case.
Geofencing Is Becoming a Bigger Problem
One state restriction can be managed. The bigger challenge comes when multiple jurisdictions start requiring different versions of the same nationally available product. Michigan is not the only place where Kalshi has encountered geofencing requirements. The company has faced similar restrictions elsewhere as its broader dispute with state regulators continues.
For an exchange built around bringing traders together in national markets, every additional geographic restriction creates another operational complication. This is also happening while the federal legal picture remains unsettled. Different courts have reached different conclusions about the balance between state authority and federal CFTC oversight, leaving Kalshi fighting on several fronts at once.
The Trade Handle Prediction Markets Take
The $500,000 potential daily fine grabs your attention, but geofencing is the bigger story here. Kalshi's entire argument has centered on operating a federally regulated exchange with nationally available contracts. Each state where sports markets must be blocked makes that model a little harder to maintain.
A final ruling in Michigan could still change things, so this preliminary injunction does not settle the larger legal question. What it does show is how quickly a state-by-state regulatory fight can turn into a practical problem for a national prediction market exchange.