The federal derivatives regulator overseeing Kalshi said Michigan overstepped by pressuring the firm to reverse completed trades. On Tuesday, the U.S. Commodity Futures Trading Commission (CFTC) intervened, issuing an order that blocks Kalshi from complying with a local court directive to cancel earlier customer transactions.

The decision heightens the agency’s legal standoff with state authorities, as the CFTC continues to assert its sole authority over trading on Kalshi, which operates under its designation as a regulated contract market.

CFTC Chairman Mike Selig said the commission will not allow states or courts to push regulated entities into violating federal law or CFTC rules. A supporter of prediction markets, Selig has advocated for more accommodating regulations while strongly defending the agency’s jurisdiction, even when it clashes with state actions.

The CFTC has already sued several states attempting to curb or penalize event-based trading platforms by labeling them as gambling. It also noted that Michigan is the first state to directly target already executed transactions.

Selig warned that undoing completed trades would be unprecedented and could trigger wider disruption, undermining the certainty and trust that markets rely on.

In June, a Michigan circuit court ordered Kalshi to halt online sports-related contracts in the state at the request of the attorney general.

On July 2, Kalshi filed an emergency request with the CFTC seeking guidance on how to respond to a court order requiring certain Michigan users’ trades to be voided, canceled, and refunded. The commission instructed the firm not to comply, cautioning that allowing such reversals could weaken market confidence by making traders fear that completed transactions might later be undone.