A Michigan judge has reportedly extended a temporary order that bans Kalshi from offering sports contracts in the state.
Ingham County Circuit Court Judge Rosemarie Aquilina ruled at a hearing yesterday that the ban she ordered late last month should remain in place, InGame reported.
Kalshi has been fighting the order, but has agreed to comply with its terms by blocking all users with Michigan addresses from its sports contracts.
However, Aquilina’s latest ruling will force Kalshi to use geoblocking solutions to identify whether individual users are physically located in Michigan. If they are, the Kalshi platform must automatically block them from its sports event offerings.
The judge reportedly gave Kalshi until August 12 to enforce geoblocking solutions. Failure to comply after this deadline will result in fines of $0.5 million per day.
That represents a 317% rise in Aquilina’s previous fine threats for non-compliance.
Michigan Judge: Kalshi Must Geoblock This State
Kalshi last month said it would appeal the court’s verdict. The federal regulator, meanwhile, has launched multiple lawsuits against states, alleging that Kalshi and its competitors provide unregistered sports betting services.
So far, nine states face legal action, with more lawsuits potentially incoming.
Some lawyers believe the regulator, the Commodity Futures Trading Commission, may have the edge over the states in the protracted prediction market struggle if the legal battle continues to rumble on.
And the Michigan court has spent the past few weeks discussing the viability of geoblocking solutions.
Mixed results have been reported in Nevada, where state authorities last month claimed Kalshi’s geolocation solutions either do not function correctly or are not being implemented.
Nevada gambling regulators say Silver State residents can easily bypass geoblock bans using common workarounds such as commercially available virtual private network (VPN) software.
Critics have also accused Kalshi of using cheap in-house geolocation solutions rather than investing more in superior third-party products.
Kalshi’s Third-Party Provider
Kalshi told the Michigan court that it is now working with a third-party provider, GeoComply. But it said it and its partners need more time to test integration with the Kalshi platform.
Attorneys for the state, however, accused Kalshi of stalling for the duration of the World Cup.
Aquilina repeated her assertion that Kalshi offers “gambling” services. “What you’re doing is defining it in a way that works for you, but not for Michigan,” she said.
The court is set to reconvene on July 20.
Aquilina’s assertions yet again put the states on a collision course with the CFTC and its chairman, Michael Selig.
Earlier this month, Selig repeated his own assertion that CFTC-regulated platforms like Kalshi do not provide gambling services.
He insisted that prediction market contracts are financial instruments, meaning only the commission has the power to regulate them.
Legal observers say there is little chance of the states and the CFTC striking a compromise, although industry insiders believe various solutions already exist. Lawyers instead backed Congress or the Supreme Court to intervene and untangle the mess.
Two Systems Can Co-Exist, Says Law Professor
Law professor Melinda Roth told CasinoBeats that she believes “the two systems of sports betting and prediction markets can co-exist.”
A lot will hinge on what the Supreme Court (SCOTUS) eventually decides. Roth says, “Anyone who thinks they can predict how SCOTUS might rule on this is not being realistic.”
A ruling may also fail to provide a definitive conclusion in the fight for authority over prediction markets.
“First, if a ruling only involves sports event contracts, that would mean that all the other prediction markets based on cultural, political, financial, economic, scientific, etc. would still exist and be traded on DCMs (designated contract markets) and regulated by the CFTC,” said Roth. “While sports event contracts have been the overwhelming majority of the amounts that have been traded (estimates are 70-90% or so), these other sectors have been growing. Political event contracts, of course, will be bigger as the midterm US elections approach.”
In Michigan, the block is only on Kalshi’s sports markets for now. Kalshi says it will continue to challenge the ruling, although it has not yet formally appealed.
–Adam Roarty contributed to this report
