Michigan became only the second state to successfully ban Kalshi’s sports event contracts, as a state court handed down a temporary restraining order that would require the prediction market to geofence the state from its sports offering.
Kalshi will appeal, but the order goes into effect immediately, and so the operator will implement “restrictions” as it waits for relief.
“It’s no surprise that we disagree with the state’s decision and will fight it in court,” Kalshi spokesperson Elisabeth Diana told InGame via email. “Kalshi is subject to exclusive federal jurisdiction. We won’t be bullied by interests that care more about protecting their monopolies than their consumers. In the meantime, we’re implementing restrictions.”
The order will be in effect for 14 days, until July 13.
Massachusetts and Nevada have both previously issued orders banning Kalshi. Nevada’s order is in effect, while the order in Massachusetts was appealed, with a final decision still pending.
Irreparable harm
The order was granted ex parte, meaning that Kalshi did not have a chance to make its case on why it should not have been granted.
“Michigan and its most vulnerable citizens are suffering and will continue to suffer immediate and irreparable harm absent relief from being exploited by Kalshi’s sports betting operation masquerading as an investment opportunity,” the order said.
It said that those harms are partly due to Kalshi offering sports betting to customers aged 18 and older, when the state minimum age for sportsbooks is 21, and that Kalshi does not have the same protections for consumers that are required of sportsbooks. It also pointed to lost tax revenue, an unfair playing field between Kalshi and sportsbooks as examples of harms that come about from Kalshi’s continued operation of sports contracts in Michigan, and infringement on the sovereignty of Michigan-based tribes.
Fined $120,000 per day
Kalshi will be fined $120,000 for each day it does not block sports contracts in Michigan.
Over the past week, Kalshi has been making around $10 million per day in fees on sports event contracts. Michigan is home to roughly 3% of the U.S. population, meaning that even if Michiganders were disproportionately unlikely to use Kalshi, it would still probably be cheaper to pay the fine than to block them all. However, deliberately choosing to pay the fine would likely lead to contempt proceedings.
The $120,000 figure was calculated by taking 1% of Kalshi’s volume — Kalshi fees average a little over 1% of volume — at the start of June, when it averaged around $600 million per day. The volume has since doubled, amid the World Cup and an explosion of parlays.
The order specifies that it applies to “any person located in Michigan” and requires geofencing, to be implemented by “a third party geolocation services provider licensed by the Michigan Gaming Control Board.” Alternatively, Kalshi can propose a third-party geolocation provider licensed in another state, and the gaming control board will decide whether it is appropriate.
In Nevada, the only state where a sports contract ban has actually gone into effect, Kalshi initially banned customers from accessing sports contracts based on their addresses — which allowed visitors to Nevada to bet on sports — before it was required to implement geofencing. However, the state said that the prediction market’s in-house geofencing solution — which it spent $190,000 on, far below its initial cost estimate — did not work properly.
The decision came after Michigan sued Kalshi in March. Initially, Kalshi tried to have the case heard in federal court, before it was sent back down to a state court on June 25.
