A Michigan court has extended a temporary prohibition on Kalshi’s sports-event contracts and ordered the prediction market operator to implement geofencing measures in the state by Aug. 12, increasing the potential financial consequences for failing to comply.

Judge Rosemarie Aquilina of Michigan’s 30th Circuit Court ruled that Kalshi must continue blocking access to its sports contracts in Michigan while the legal dispute over the company’s operations moves forward. The decision follows an earlier June 29 ruling in which the judge determined that Kalshi’s sports-event contracts constituted illegal sports betting under Michigan law.

Under the latest order, Kalshi has 30 days to establish geolocation controls that prevent users located in Michigan from accessing the contracts. If the company does not meet the deadline and fails to secure a court-approved extension, fines of $500,000 per day will begin on Aug. 13.

The ruling represents another setback for Kalshi as regulators and courts across the United States continue to debate whether sports-event contracts fall under federal commodities regulation or state gambling laws.

Court Maintains Restrictions While Legal Battle Continues

The dispute centers on whether Kalshi’s offerings should be regulated exclusively by federal authorities through the Commodity Futures Trading Commission (CFTC) and the Commodity Exchange Act (CEA), or whether states retain authority to prohibit them as gambling products.

During a hearing this week, Kalshi attorneys argued that Congress intended federal law to take precedence in regulating designated contract markets. Attorney Will Havemann told the court that historical efforts to regulate commodity derivatives demonstrated that lawmakers understood federal oversight would supersede state gambling restrictions in this area.

“It would have been clear to Congress that of course one of the things it was doing was preempting state gambling laws as to designated contract markets, while leaving state gambling laws untouched outside of that area,” Havemann said according to InGame.

He further argued that Congress made a deliberate decision in 1974 to place oversight in the hands of a federal agency regardless of whether certain states viewed the activity as gambling.

Judge Aquilina appeared unconvinced by that position. Addressing Kalshi’s argument, she stated: “But you aren’t really talking about commodities, interest rates, things like that, but gambling, which has traditionally been denied by the states. What you’re doing is defining it in a way that works for you, but not for Michigan.”

Assistant Attorney General Lauren Fitzsimons, representing the state, argued that if Congress had intended to broadly eliminate state authority over gambling matters, it would have expressed that intention more explicitly in federal legislation.

The judge ultimately sided with the state’s position and extended the temporary restraining order without establishing a specific expiration date. She also concluded that Kalshi could comply with both state and federal requirements simultaneously.

Geofencing Requirement Moves Forward

A significant portion of the hearing focused on how and when Kalshi should implement geolocation technology. Following the June ruling, the company initially faced a requirement to geofence Michigan or incur fines of $120,000 per day. Kalshi later obtained an emergency pause on that requirement while it argued that implementation would be technically challenging and could raise compliance concerns under federal regulations.

At present, the company restricts access based primarily on customer registration information. As a result, users who registered outside Michigan may still be able to trade sports contracts while physically located in the state, while Michigan residents traveling elsewhere may remain restricted.

Kalshi attorneys informed the court that the company has been working with geolocation provider GeoComply to develop a solution. Havemann acknowledged, however, that a definitive completion timeline was not yet available. Attorney Andrew Porter also told the court that extensive testing would be necessary before geofencing could be fully deployed. “Kalshi has taken a very serious approach to trying to get this integrated,” Porter said. “This takes a lot of work to get implemented.”

State Questions Delay as GeoComply Provides Testimony

Michigan argued that Kalshi benefits financially from postponing geofencing measures because of the significant trading activity generated by recent sporting events, including the FIFA World Cup.

“Part of why Kalshi is trying to drag this out is the World Cup,” Fitzsimons said. She told the court that Kalshi’s trading volume reached approximately $30 billion during the previous 30 days and argued that delaying implementation remained financially advantageous.

“Kalshi is incentivized to drag this out and avoid geofencing for as long as possible, because it is financially beneficial to do so,” Fitzsimons said.

The state also called GeoComply Senior Vice President of Geolocation Chad Kornett to testify. Kornett explained that address-based and IP-based controls can produce inaccurate results because internet traffic may be routed through locations that differ from a user’s actual position.

According to Kornett, geofencing projects can generally be completed within one to two weeks, although much of the timeline depends on the customer’s own technical preparations.

After considering the arguments, Aquilina determined that a 30-day implementation period struck the appropriate balance between technical complexity and consumer protection concerns. The judge also warned that delays would not be tolerated and emphasized that progress must occur throughout the implementation period. If Kalshi waits until the final days before taking meaningful action, the court could impose sanctions.

Michigan remains one of only two states, alongside Nevada, to successfully enforce restrictions on Kalshi’s sports-event contracts. The broader dispute over prediction markets and sports-event contracts continues to unfold across multiple jurisdictions, with regulators, courts, and the CFTC pursuing competing interpretations of the law. Many observers expect the issue to ultimately reach the U.S. Supreme Court.