Michigan Tightens the Screw on Kalshi as $500,000 Daily Fines Enter the Picture

Key Points

• Judge Aquilina extended the sports contract ban and set 12 August as Kalshi’s hard geofencing deadline, with fines of $500,000 per day from 13 August.
• The CFTC stepped in on 15 July to block Kalshi from cancelling Michigan trades, directly contradicting the state court’s order and leaving Kalshi caught between two regulators.
• Kalshi’s current address-based blocking leaves a live loophole: out-of-state users physically inside Michigan can still trade sports contracts freely.

Michigan is not letting Kalshi breathe. Judge Rosemarie Aquilina of the 30th Circuit Court extended the platform’s sports contract ban and set 12 August as the firm deadline for geofencing compliance. Fail to meet it, and Kalshi faces $500,000 in fines for every single day starting 13 August.

The timeline is worth tracing. On 29 June, Aquilina ruled that Kalshi’s sports event contracts constituted illegal betting under Michigan law, ordering the platform to block Michigan residents within two weeks or absorb $120,000-per-day fines. Kalshi secured an emergency pause on the geofencing requirement while it pressed its legal arguments. That breathing room has now run out.

The Loophole Regulators Say Breaks the Ban

What Kalshi has put in place instead of geofencing is a sign-up filter: accounts registered to Michigan addresses are blocked at the point of creation. The problem is obvious enough. Anyone from Ohio, Indiana, or anywhere else physically inside Michigan can open the app and trade sports contracts without restriction.

State regulators say that the gap guts the order entirely. Oral arguments on whether to extend the ban and tighten geofencing obligations were heard last week, with both sides presenting their positions directly to Aquilina. Her answer was to extend the TRO and significantly increase financial pressure.

Federal vs State: Two Orders, One Company in the Middle

The same week Aquilina hardened her position in Michigan, the situation became considerably more complicated at the federal level. On 15 July, the Commodity Futures Trading Commission blocked Kalshi’s emergency rule proposal to cancel open trades for Michigan residents, ordering the platform instead to honour all existing positions under normal market practices.

CFTC Chair Michael Selig was direct about the agency’s position: “A state cannot force a DCM to violate its obligations, and federal law does not permit a DCM to discriminate against a state’s residents. Cancelling trades that have already been executed is an unprecedented step that risks a cascading effect on the entire marketplace and undermines the certainty in contracting that is a necessary component of a functioning market. The Commission will not allow states or state courts to bully registered entities into violating the Commodity Exchange Act and CFTC regulations.”

Kalshi had already complied with the Michigan court’s order to unwind those trades before the CFTC intervened. Robert J. Denault, head of enforcement at Kalshi, posted the company’s position publicly: “We are disappointed by this decision and believe it is unfair to Kalshi. We already acted and unwound the trades, as the Michigan court order required us to do. We are being put in an impossible position, looking to follow state court orders that may contradict our federal regulatory obligations. We did not have a choice.”

The CFTC now has 90 days to review the emergency rule, including a 30-day public comment period, before issuing a final determination.

The Legal Argument Aquilina Rejected

Kalshi’s attorneys built their case around the Commodity Exchange Act, arguing Congress designed the federal futures framework to override state gambling law, historically including attempts to classify grain futures as gambling. Aquilina heard it and cut through it: “You aren’t really talking about commodities, interest rates, things like that, but gambling, which has traditionally been denied by the states. What you’re doing is defining it in a way that works for you, but not for Michigan.”

From the state’s bench, Assistant Attorney General Lauren Fitzsimons countered that a Congress intent on eliminating state gambling authority entirely would have written that plainly. She also put money on the table as a motive for the delay: Kalshi’s reported trading volume during the FIFA World Cup reached $30 billion, with daily fee revenues said to exceed $10 million. Sitting out geofencing while the World Cup ran was profitable.

Aquilina closed with a clean summary of her legal position: “Conflict preemption does not apply because Kalshi can abide by both state and federal law and has not complied with Michigan law. I understand that it’s a burden on Kalshi, but it’s even more of a burden on the public.”

What GeoComply Actually Said?

The court requested technical testimony from Chad Kornett, Senior VP at GeoComply. His evidence directly undercut Kalshi’s complexity argument. IP-based location blocking, Kornett explained, misidentifies users regularly even without VPN interference. GPS-based geofencing, which is the standard used by Michigan Gaming Control Board-licensed operators, typically takes businesses one to two weeks to implement once technical preparation is in order.

Kalshi’s lawyers confirmed talks with GeoComply were ongoing. They could not, however, give the court any timeline for when the integration would actually be complete.

Michigan and Nevada: The Only Two States That Made It Stick

Michigan is one of only two states to secure a court-enforced ban on Kalshi’s sports contracts, alongside Nevada. Nevada went through the same address-based blocking workaround first before Kalshi moved to an internal geolocation system that state regulators there still consider inadequate. Massachusetts had its own injunction, but that ban was paused while Kalshi pursued an appeal.

The scale of what Kalshi is navigating across US markets reflects a broader wave. Monthly betting volume across prediction markets climbed from $5 billion in September 2025 to $24 billion by April 2026, according to a Pew Research Centre analysis. Sports remain the biggest category on both Kalshi and Polymarket, with Kalshi generating around $1.59 billion in sports-related volume in the week of 18 May alone. The financial stakes behind the legal wrangling are not abstract.

More than a dozen US states have taken action against prediction market operators. The CFTC has sued several of those states in return, arguing that event contracts fall under federal authority. The Economic Times reported that the CFTC’s intervention on Kalshi’s Michigan trades marks the latest direct collision between federal regulators and state-level enforcement, with analysts suggesting the dispute is unlikely to be settled below the Supreme Court level.

Expert Analysis

The 12 August deadline is the sharpest test Kalshi has faced in any state jurisdiction so far. The original $120,000 fine was manageable against daily revenues reportedly exceeding $10 million. At $500,000 per day from 13 August, the calculus changes. Kalshi can no longer treat delay as a cost of doing business.

What makes this even harder is the CFTC intervention. Kalshi now sits between a state court demanding geofencing compliance and a federal regulator ordering it to continue fulfilling trades that those same courts want cancelled. Denault’s “impossible position” framing is not rhetorical; the company has already unwound trades under the Michigan order and then been told by the CFTC that doing so violated federal law.

GeoComply’s one-to-two-week implementation window, cited in open court, leaves Kalshi with no credible technical excuse for missing the August deadline. The only variable is whether the company seeks another emergency pause before 12 August, and whether Aquilina, having already heard and rejected the preemption argument once, grants it.