Commodity Futures Trading Commission (CFTC) rejected Michigan court’s decision to annul transactions Kalshi. According to a statement from the CFTC, it exercised its authority to order Kalshi to execute open transactions.
CFTC Chairman Michael Selig He said that a state cannot force a person Designated Contract Market (DCM) obligations and discriminate against state residents.
“Cancelling transactions that have already been executed is an unprecedented step that risks having a cascading effect on the entire market and undermining the certainty of contracts that are a necessary component of a functioning market. The Commission will not allow states or state courts to pressure registered entities to violate the Commodity Exchange Act and CFTC regulations.”
The state of Michigan’s action and the CFTC’s response are emblematic of the ongoing legal battle between federal oversight and attempts by some states to usurp federal regulatory authority over prediction markets.
The CFTC filed suit against the states of Arizona, Connecticut, Illinois, Kentucky, Minnesota, New Mexico, New York, Rhode Island and Wisconsin.
The CFTC also filed joint briefs with the U.S. Court of Appeals for the Sixth and Ninth Circuits and the Massachusetts Supreme Judicial Court.
While states believe they should have the final say, while there are many who argue that prediction markets are subject to the rules of the game, a state-based regulatory regime would eliminate the innovation that prediction markets bring to the country.
The CFTC stated that it has a responsibility to maintain public confidence in derivative markets by ensuring market flexibility and predictability.
