Kalshi faced significant setbacks this week, including a ruling from a Michigan judge that temporarily prohibits the company from offering sports event contracts. On Monday, Circuit Court Judge Rosemarie Aquilina granted a temporary restraining order (TRO) requested by Michigan Attorney General Dana Nessel, compelling Kalshi to cease its sports markets in the state. The order mandates that Kalshi utilize a third-party geolocation service to prevent access to its products from within Michigan for the duration of the 14-day order period.
If Kalshi fails to comply with the geolocation requirement, the company could incur fines of up to $120,000 per day. In a statement, Nessel emphasized the state's commitment to protecting its residents from unlicensed gambling operations: "Our gambling laws exist to protect Michiganders from unlicensed, predatory operations, and failing to comply with them carries serious legal consequences. 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 remarked on the importance of maintaining fair competition among gambling platforms in Michigan, ensuring accountability and consumer protection.
The TRO also prohibits Kalshi from promoting its products and accepting new registrations in Michigan while the case unfolds in state court. Kalshi responded to the ruling through a spokesperson, asserting their intent to challenge the state’s decision: "It’s no surprise that we disagree with the state’s decision and will fight it in court. Kalshi is subject to exclusive federal jurisdiction. We won’t be bullied by interests that care more about protecting their monopolies than their consumers. In the meantime, we’re implementing restrictions."
The origins of this case go back over three months, when Nessel filed for a permanent injunction in Ingham County Court, asking the court to classify Kalshi’s online sports betting operation as a common law nuisance. Her filing described Kalshi as operating a prediction market that allows Michigan residents to participate in unlicensed gambling disguised as event contract trading.
Commenting on the initial filing, Nessel stated, "Corporations cannot circumvent state gaming laws. My office will hold those who sidestep Michigan’s consumer protections accountable and ensure that betting in our state remains lawful, fair and subject to the oversight our residents expect and deserve."
In response to Nessel’s actions against Kalshi, Polymarket sought an injunction to prevent Michigan from prohibiting event contracts. However, its request for a TRO was denied, and its plea for injunctive relief was turned down on June 17.
As state-level judicial proceedings continue, including a case before the Massachusetts Supreme Court and an ongoing legal dispute in Arizona concerning Kalshi, a broader question persists regarding the longer-term implications of these actions. Industry analysts anticipate that the varied recent rulings from the Third and Sixth Circuit Courts of Appeals may ultimately lead to a significant federal decision.
Ian Mcginley, a former Director of Enforcement at the CFTC now in private practice, spoke at the SBC Summit Americas in Ft. Lauderdale, Fla., indicating that a Supreme Court review of these cases is likely. "Most people think that the first type of lawsuit, the state authorities against a number of prediction markets, will reach the Supreme Court. Anytime you have courts taking different views of the law, it tends to be ripe for the Supreme Court," he stated during a panel discussion on prediction markets.
