Kalshi Ordered to Stop Offering Sports Event Contracts in Michigan
A judge in Michigan on Monday approved a temporary restraining order requiring prediction market giant Kalshi to stop offering its sports event contracts in the Great Lakes State.
No sports event contracts in Michigan ... for now
Ingham Circuit Court Judge Rosemarie E. Aquilina agreed with the Michigan Attorney General that Kalshi's sports market trades have harmed Michigan citizens and the state's sports-betting tax revenue. The federally regulated prediction market does not have to pay state gaming taxes, unlike state-licensed sportsbook operators.
In the document for the ruling, Aquilina stated that Kalshi’s sports market trades are “masquerading as an investment opportunity.” She also said that Kalshi is not complying with Michigan gaming laws, unlike the state-licensed operators.
What the Michigan AG said
After the ruling, Attorney General Dana Nessel released a statement saying, “We remain committed to enforcing a level playing field for all gambling platforms in Michigan and ensuring that companies cannot evade accountability or exploit consumers under the guise of a prediction market.”
The temporary restraining order will remain in effect until July 13, and Michigan may then seek a preliminary injunction for a longer period.
The same argument in other states
Kalshi and the Commodity Futures Trading Commission (CFTC), which regulates prediction markets, have made the same argument in this case as they have with lawsuits in other states. They have said that states cannot block prediction market services because they are federally regulated.
The CFTC has filed lawsuits in several states, including New Mexico, seeking to ban prediction market companies from providing their services.
Michigan becomes third state to order ban
With the recent ruling, Michigan became the third state to order Kalshi to stop offering sports markets.
Nevada has also banned Kalshi from offering sports event contracts, and while Massachusetts has done the same, a stay is pending on Kalshi's appeal.
Kalshi's use of geolocation service
Under Michigan's temporary restraining order, Kalshi must also implement a geolocation service in the state.
It must use a third-party service to prevent Michigan residents from accessing the sports markets. Kalshi must use a geolocation service that carries a Michigan Gaming Control Board license. However, the ruling also stated that an out-of-state service could be used if it meets the board’s requirements.
A pretty penny for unmet requirements
Kalshi would be fined $120,000 daily if the geolocation requirements are not met.
The figure of $120,000 was calculated by dividing Kalshi's daily trading volume of $600 million by the number of states (50). The daily fine of $120,000 is the same as in Nevada.
Kalshi will fight back
It is no surprise that, like in other states, Kalshi will contest the ruling in Michigan.
After the ruling, Kalshi head of communications Elisabeth Diana released a statement saying, “Kalshi is subject to exclusive federal jurisdiction.
"We won’t be bullied by interests that care more about protecting their monopolies than their consumers.”
While Kalshi is planning to contest the temporary restraining order, Diana also said the prediction market platform would begin to implement Michigan restrictions.
