Michigan Orders Kalshi to Geofence and Raises the Penalty to $500,000 a Day

The temporary order we reported in July carried $120,000 a day. The preliminary injunction that replaced it on 1 September carries more than four times that, and tells Kalshi which geolocation vendor category it must use.

• Ingham County Circuit Court Judge Rosemarie E. Aquilina granted a preliminary injunction on 1 September requiring Kalshi to keep blocking Michigan residents from sports-related event contracts, in force until a final ruling
• Violations carry a penalty of $500,000 per day, against the $120,000 a day attached to the 14-day temporary restraining order we reported in July
• Kalshi must use a third-party geolocation provider licensed by the state's gaming regulator and comply with its geofencing specifications, so the state is prescribing the compliance stack rather than only the prohibition
• The order also bars deposits from anyone in Michigan, account creation or funding by residents, and advertising through apps, push notifications, influencers, affiliates or paid placements
• It reaches products "functionally similar" to sports betting, naming parlays, moneyline, in-game and proposition bets, which is a wider definition than the contracts the case began over

A State Court Wrote an Operating Manual, Not Just a Prohibition

Judge Rosemarie E. Aquilina of the Ingham County Circuit Court granted Michigan's application for a preliminary injunction on 1 September. It replaces the temporary restraining order granted earlier in the summer and remains in effect until the case reaches a final ruling.

The proceedings were brought in March by Attorney General Dana Nessel, acting for the state and working with the Michigan Gaming Control Board, alleging that Kalshi offered sports event contracts in Michigan without state approval and so breached the Michigan Lawful Sports Betting Act.

The substance of the order goes well beyond telling the company to stop. Kalshi must block Michigan residents from sports-related event contracts using a third-party geolocation services provider licensed by the state's gaming regulator, and must comply with that regulator's geofencing specifications. It may not accept deposits from anyone in Michigan, nor allow residents to create or fund accounts. It may not advertise into the state through applications, push notifications, influencers, affiliates or paid placements.

The scope clause is the one to read twice. The injunction covers products "functionally similar" to sports betting, and names parlays, moneyline, in-game and proposition bets. That is a description of wagering behaviour rather than of a contract type, and it forecloses the usual response of restructuring the product and continuing.

The financial exposure has changed by a factor of more than four. The July restraining order carried $120,000 a day. This one carries $500,000 a day.

The Compliance Requirement Is More Onerous Than the Fine

A daily penalty only bites if a company is found in breach, and companies litigating in good faith mostly are not. The requirement to use a geolocation provider licensed by the Michigan Gaming Control Board is different, because it takes effect immediately and it is a structural concession. Kalshi's position throughout has been that it is a federally regulated exchange whose compliance obligations run to the Commodity Futures Trading Commission. Being ordered to procure a vendor from a list maintained by a state gaming regulator, and to meet that regulator's technical specifications, is being made to operate as a licensed sportsbook does in everything but name. Every day the injunction stands, the practical distinction the company relies on gets harder to describe, and other state regulators now have a template that asks for the same thing.

"Functionally Similar" Is the Phrase Other States Will Copy

Most orders against prediction markets have been drafted around the instrument: sports event contracts as defined and self-certified with the CFTC. Michigan has drafted around the outcome instead. By covering anything functionally similar to sports betting and naming parlays, moneyline, in-game and proposition markets, the court has pre-empted the redesign that usually follows an adverse ruling. This matters beyond Michigan because it is copyable language, and because it engages the same question now heading to the Supreme Court from a different direction. If a contract that behaves like a parlay is a parlay for the purposes of state law, the federal preemption argument has to do more work than simply establishing that the instrument is a swap.

Two Tracks Are Running at Different Speeds

The day before this injunction, New Jersey petitioned the Supreme Court to decide whether federal registration displaces state gambling law at all. That question will take months to reach a grant decision and longer to answer. Michigan's order operates now. The gap between those two clocks is the sector's real problem: the constitutional argument may eventually be won, but the operational restrictions, the geofencing obligations and the state-by-state exclusions accumulate in the meantime, and each one is a fact on the ground that a later ruling does not automatically undo. Kalshi is currently blocked or constrained in a growing list of states while the question of whether any of it was lawful sits undecided.

Michigan has told a federally registered exchange which state-licensed vendor to buy from. Whatever the Supreme Court eventually says about preemption, that instruction is in force today.