A Michigan court has issued a preliminary injunction against the prediction market platform Kalshi, requiring it to cease offering sports-related contracts to residents within the state. If the platform fails to implement proper geofencing, it will face daily fines of $500,000.
The court requires execution within three days.
Pursuant to the order signed this week, Kalshi must implement geofencing measures that comply with state regulations through a third-party service provider licensed by the Michigan Gaming Control Board.
The court also required Kalshi to send the injunction to all futures commission merchants offering its sports contracts within three business days, along with the contact information for the Michigan state attorney’s office. However, the court stated that Kalshi is not responsible for the subsequent actions of these intermediaries.
The state claims it bypassed gambling regulations.
In March of this year, Michigan Attorney General Dana Nessel sued Kalshi, alleging that the platform offered unlicensed sports betting services to residents of the state under the guise of event contracts. The state argues that such products are, in essence, sports betting rather than standard investment contracts.
Court documents state that the minimum age for legal sports betting in Michigan is 21, while Kalshi accepts users as young as 18. The judge also found that this model undermines state revenue streams allocated to schools, problem gambling prevention, and emergency services, and impacts tribal gaming revenues.
State courts and federal authorities are diverging in their approaches.
The case was initially filed in state court, after which Kalshi applied for removal to federal court but was unsuccessful; the case was subsequently remanded to the Ingham County Court. The court issued a temporary restraining order in June and issued this preliminary injunction after hearing from both parties in August.
Kalshi has recently faced setbacks in state-level litigation. Reports indicate that a judge in Washington State also ordered it to delist most of its related markets in August this year. In contrast, the U.S. Commodity Futures Trading Commission previously exercised emergency authority to allow Kalshi to continue trading.
Additional information: The dispute surrounding prediction markets and state gambling regulatory authority continues to expand. The U.S. Commodity Futures Trading Commission has filed lawsuits against several state governments, including Illinois, Arizona, Connecticut, Wisconsin, and Minnesota, on similar issues. This order in Michigan will remain in effect until a final ruling is issued in the case.