Michigan Wants Kalshi Held in Contempt as State Crackdown Moves Beyond Trading

Michigan has already won an order barring Kalshi’s sports contracts, and now it wants the prediction markets operator held in contempt for allegedly failing to follow it.

Attorney General Dana Nessel’s office filed a Sept. 29 motion asking Ingham County Circuit Judge Rosemarie Aquilina to hold Kalshi in civil contempt. The state alleges that sports betting promotions continued reaching Michigan residents after the judge’s Sept. 1 preliminary injunction prohibited both the contracts and their marketing.

Aquilina scheduled a Nov. 24 hearing for Kalshi to explain why it should not be held in contempt. The injunction authorizes a $500,000 daily fine for noncompliance, but the contempt request does not find that Kalshi violated the order or that those penalties have been imposed.

The dispute follows a similar enforcement fight in Nevada, where regulators sought contempt sanctions after investigators said they could still trade despite a court-ordered block.

Together, the cases show that the industry’s legal battle is no longer just about who gets to regulate prediction markets. It is also about what compliance looks like while that question remains unsettled.

Michigan points to emails and targeted ads

The evidence in Michigan’s contempt motion focuses on marketing, not simply whether someone placed a trade.

According to State Affairs reporting, a Michigan Gaming Control Board (MGCB) regulation specialist kept receiving emails promoting sports betting through her Michigan-based Kalshi account after the ban took effect. The state also cited another account holder who received targeted emails encouraging trades on upcoming NFL games.

A separate Michigan resident, who said they had never downloaded a prediction markets app or created an account, reported receiving numerous Kalshi advertisements after July 1. The filing included a Sept. 20 YouTube ad promoting trading on an upcoming Los Angeles Rams game under the label “Kalshi: Trade Football and More.”

The Sept. 1 order prohibits Kalshi from advertising, promoting, or marketing the covered products to people in Michigan or using a Michigan address. It covers websites, mobile apps, emails, push notifications, social media, influencers, affiliates and paid placements.

Kalshi must also use a third-party geolocation provider licensed by the MGCB and meeting the board’s technical requirements. The order prohibits workarounds involving accounts created elsewhere and products that function like single-game wagers, parlays, in-game bets or player props.

The preliminary injunction extended an earlier temporary restraining order and increased the potential daily penalty from $120,000 to $500,000.

Nevada offers a warning about compliance

Nevada’s dispute provides a close parallel, though the alleged violations are different.

The Nevada Gaming Control Board sought contempt proceedings in June after investigators said they could still purchase prohibited contracts. Kalshi later agreed to deploy GeoComply’s location-verification technology by August 12, removing the need for a scheduled contempt hearing.

That did not end the argument.

In an August 14 filing, Nevada regulators said investigators had placed nine trades through Kalshi’s mobile app while physically inside the state the day after the deadline. The board sought $120,000 in daily penalties plus legal fees.

The company said investigators misrepresented its residence and used an older app version to circumvent restrictions, arguing that it went beyond what was required to geofence Nevada. The gaming board called those accusations baseless and said Kalshi had missed its agreed compliance deadline.

Nevada’s dispute centered on access and allegedly completed trades. Michigan’s motion cites continued solicitation through emails and advertising. A system that blocks trading does not necessarily resolve a separate prohibition on marketing.

Coinbase and Robinhood step back in Michigan

Michigan is also pressing companies that distribute sports event contracts through their own platforms.

Coinbase Financial Markets agreed to stop offering the products to Michigan users by midnight Saturday, joining Robinhood, which had already reached a similar agreement. Kalshi’s injunction required it to notify other platforms using its exchange, including both companies, within three business days of the September ruling.

“Operators are halting these activities because they face significant legal consequences for continuing to offer them in our state,” MGCB Executive Director Henry Williams said in a statement.

Coinbase had unsuccessfully sought a preliminary injunction against Michigan regulators in August. Its withdrawal and Robinhood’s agreement demonstrate that a state enforcement action can affect access through multiple apps, not just the exchange listing the contracts.

For Michigan, the contempt request is another step in making its court victory effective. For Kalshi, it creates potential exposure separate from its argument that federal law should prevent the state from regulating the products in the first place.

The appellate divide keeps widening

Kalshi’s central position is that the Commodity Exchange Act gives the Commodity Futures Trading Commission exclusive authority over its contracts, displacing state gambling restrictions. States argue that sports contracts operate as wagers and should face the same licensing, tax and consumer-protection requirements as sportsbooks.

Federal appeals courts have divided over that question:

• The Third Circuit sided with Kalshi in its New Jersey dispute, supporting its federal preemption argument.

• The Ninth Circuit ruled against Kalshi in the Nevada litigation, concluding that it had not shown a likelihood that federal law displaced Nevada’s gaming requirements.

• The Sixth Circuit ruled for Ohio and Tennessee regulators, rejecting Kalshi’s effort to shield its sports contracts from state gambling enforcement.

Kalshi requested rehearing in both the Ninth and Sixth Circuits. Its Oct. 9 Sixth Circuit petition also cites new CFTC rulemaking as a reason to reconsider the court’s analysis. Those requests do not themselves overturn the decisions.

The CFTC’s proposed rule would expressly include sports and other event contracts within the federal definition of a swap. But it remains a proposal, not a final rule resolving the courts’ disagreement.

The Supreme Court route runs through other cases

Michigan’s contempt proceeding is not the case currently asking the U.S. Supreme Court to settle the national jurisdictional fight. That route runs through pending petitions arising from New Jersey and Nevada.

New Jersey asked the justices to review the Third Circuit’s pro-Kalshi decision. Robinhood and Crypto.com’s North American Derivatives Exchange have separately sought review of Nevada-related rulings. The Supreme Court has not agreed to hear those cases.

Pressure to take them is building. Attorneys general from 39 states and the District of Columbia filed a brief supporting New Jersey’s petition. The American Gaming Association, the NFL, former CFTC Chairman Gary Gensler and former Sen. Christopher Dodd have also submitted briefs urging review.

Those proceedings could ultimately determine whether states can apply their gambling laws to federally regulated sports-event contracts.