CFTC blocks KalshiEX emergency rule change, orders pending Michigan trades to be fulfilled

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CFTC blocks KalshiEX rule

Highlights

CFTC stayed KalshiEX's emergency rule change and ordered fulfillment of pending Michigan trades despite a state court mandate to cancel them.
CFTC asserts federal law preempts state intervention, emphasizing that canceling executed trades would disrupt markets and undermine contractual certainty.
Michigan's attempted interference marks the first such action by a state, prompting CFTC lawsuits and amicus briefs against multiple states in federal courts.

Federal intervention over Michigan trade dispute

As reported by the Commodity Futures Trading Commission (CFTC), the agency is using its authority to stay an emergency rule change proposed by KalshiEX, LLC after a Michigan state court ordered the company to cancel some previously executed trades involving Michigan residents. The regulator is also exercising emergency powers to require KalshiEX to fulfill the open trades in line with its standard practices.

The CFTC says the Commodity Exchange Act requires it to maintain a uniform national market for derivatives transactions. It adds that market participants must have impartial access to CFTC-regulated venues and that registered entities must apply transparent, non-discriminatory access criteria.

Chairman Michael S. Selig says a state cannot compel a designated contract market to violate its obligations and that federal law does not allow a DCM to discriminate against residents of a particular state. He says canceling already executed trades is an unprecedented step that risks broader disruption across the marketplace and weakens contractual certainty needed for market functioning.

Broader regulatory implications for derivatives markets

The commission frames the dispute as part of a wider jurisdictional conflict between federal derivatives oversight and state-level enforcement efforts. It says preserving resilience, predictability, and public confidence in execution and clearing is part of its mandate.

Although the CFTC says Michigan is the first state to try to interfere directly with executed derivatives transactions, it adds that multiple states have pursued actions against CFTC-regulated designated contract markets in state and federal courts. The commission says it has filed lawsuits against Arizona, Connecticut, Illinois, Kentucky, Minnesota, New Mexico, New York, Rhode Island, and Wisconsin, and has also submitted amicus briefs in the U.S. Court of Appeals for the Sixth and Ninth Circuits and the Supreme Judicial Court of Massachusetts.

In our earlier article on lawmakers’ scrutiny of the Federal Reserve’s policy framework, we covered a congressional hearing focused on inflation still running above the Fed’s 2% target and calls for reforms aimed at preserving the central bank’s independence and narrowing its mandate. The discussion also highlighted criticism of the Fed’s balance-sheet expansion and what some lawmakers described as mission creep in its regulatory activities.

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