Kalshi has suffered another legal setback after a Michigan court temporarily blocked the prediction market platform from offering sports event contracts to residents of the state, adding to a growing wave of challenges from state regulators.
According to a court filing released Monday, Ingham County Circuit Court Judge Rosemarie Aquilina issued a temporary restraining order requiring Kalshi to stop offering sports-related contracts to Michigan users for the next 14 days. The order is set to expire on July 13, unless the court decides to extend it.
The ruling also carries a financial warning. If Kalshi fails to properly block Michigan residents through geolocation measures, the company could face fines of up to $120,000 per day.
Judge says Kalshi’s sports contracts could cause harm
In her order, Judge Aquilina said Michigan residents could suffer irreparable harm by being “exploited by Kalshi’s sports betting operation masquerading as an investment opportunity.”
The dispute began in March when Michigan Attorney General Dana Nessel sued Kalshi, arguing that its sports event contracts violate the state’s Lawful Sports Betting Act because they function as unlicensed gambling products.
Kalshi has consistently rejected that argument, maintaining that its contracts are federally regulated financial products rather than traditional sports bets.
Earlier this month, the company attempted to move the case into federal court, but that effort was unsuccessful. A federal judge ruled the dispute should return to Michigan’s state court system, paving the way for Monday’s temporary restraining order.
Michigan is now the latest state to take action against prediction markets. Earlier this year, Nevada secured a similar temporary injunction against Kalshi’s sports contracts. Kentucky has also entered the fight, suing Kalshi, Polymarket, and several other platforms in June over allegations that they are operating unlicensed sports betting businesses.
Overall, more than a dozen U.S. states have launched enforcement actions against prediction market operators.
At the heart of these cases is a much larger legal question: who has the authority to regulate prediction markets?
States argue that contracts tied to sporting events are effectively sports betting and should fall under state gambling laws.
Kalshi disagrees, arguing that its products are event contracts regulated by the Commodity Futures Trading Commission (CFTC) under federal law. The company says the Commodity Exchange Act gives the CFTC exclusive authority over these markets, preventing individual states from imposing their own licensing or gambling rules.
That legal battle has spread beyond Michigan. Last week, Kalshi filed a separate federal lawsuit challenging a new Illinois law that would require prediction market platforms to obtain state licenses before offering sports event contracts.
The company argues those requirements conflict with federal regulation and would force it to build costly state-by-state geofencing systems that undermine a nationally regulated marketplace.
World Cup fuels record surge in prediction market activity
The legal pressure comes at a time when interest in prediction markets is soaring. The 2026 FIFA World Cup has triggered record trading activity across the sector.
According to Dune Analytics, Polymarket recorded a record $713 million in daily trading volume on June 20, while data from DefiLlama shows monthly sports prediction volume has climbed to $9.5 billion on Kalshi and $5.3 billion on Polymarket during the tournament.
Polymarket’s World Cup winner market alone has generated more than $3.5 billion in trading volume, underlining how quickly sports prediction markets have grown.
For Kalshi, that creates a difficult situation. Demand for prediction markets has never been stronger, yet the company is facing increasing legal resistance from states that believe its sports contracts belong under gambling laws rather than federal financial regulation.
How courts ultimately resolve that dispute could shape the future of prediction markets across the United States.
