Keep Sports Prediction Markets Alive Under State Gambling Orders

The Michigan order is a product design problem

A state court can order your sports-event market off the app while the rest of the product stays live. A Michigan court issued a preliminary injunction requiring Kalshi to stop sports event contracts for users in Michigan. Kalshi faces a $500,000 daily fine if it violates the geofencing orders.

The preliminary injunction was signed by Ingham County Circuit Court Judge Rosemarie Aquilina on September 1, 2026, and it followed earlier restrictions imposed on Kalshi in June 2026. Michigan state officials, including Attorney General Dana Nessel, began the lawsuit against Kalshi in March 2026 by alleging that the platform offered illegal sports betting disguised as event contracts. Attorney General Dana Nessel characterized Kalshi as having tried to pose as a legitimate gaming operation in Michigan and said the order protects residents from predatory, unlicensed conduct.

The injunction prohibits Kalshi from offering, clearing, settling, or facilitating contracts that could be treated as online sports betting and requires it to block Michigan users from accessing the platform. The order forces product decisions: which states can see the sports market, how users are blocked, and what file proves the choice was made before launch.

Run the five-step shutdown-risk checklist before launch

Run this checklist before a sports contract appears in the product. It makes the legal theory, the state boundary, and the product control visible to engineering, product, and counsel.

• Classify each sports contract as gambling or non-gambling. Write a short legal theory for every sports market before it appears in the product. If a user can profit from a game result, assume a regulator may call it sports betting. The classification should cover the user's stake, the payout, the settlement source, and the state where the user is located. Done looks like a contract sheet that says why the product is or is not a bet, what the user pays, what the user receives, and which state law controls. Do not rely on the label event contract; state law can tie chance, stake, and prize to a sports outcome and treat the market as a wager.
• Map state definitions and licensing requirements. Build a state matrix before you open a market. For each state, record whether sports outcome contracts are treated as gambling, whether a license is required, whether a state gaming regulator has authority, and whether the product can be offered at all. Include the exact product surface, not just the company name. The finished matrix is a table that a new engineer can read without asking a lawyer. Keep it current as enforcement changes: a state may allow a non-sports prediction market while blocking sports contracts, or require a license only for certain settlement types. If a state is unclear, keep the sports market out of that state until the legal theory is solid.
• Enforce geofencing and identity checks. Make access control part of the product, not an afterthought. Geofencing stops users in blocked states from opening the app, placing orders, or settling positions. Identity checks confirm age and residence where the law requires it. Controls cover the whole flow, including deposits, withdrawals, and settlement. A working control means a blocked-state user sees a clear message and cannot reach the trading flow. Test from the user's side: a VPN, a proxy, a shared device, or a stale location signal can defeat a weak check. If location or identity is uncertain, the sports market should not be available.
• Segment the product by state. Separate sports markets from non-sports markets, and separate states where sports markets are allowed from states where they are not. A blocked-state user should not see a sports contract that the state has treated as online sports betting. The product view changes by location, with sports, political, economic, and other markets shown only where the legal theory holds. A finished segmentation means a user in a restricted state can still use allowed markets without being pushed into a blocked one. Segmentation covers search, notifications, wallet flows, and settlement, so a hidden market cannot be reached through a link, a saved position, or a push message.
• Document the compliance decision before launch. Record the decision, the legal theory, the state matrix, the access controls, and the owner for each market. Include the date, the product version, the states covered, and the person responsible for the call. A complete record is a dated compliance memo that can be read by counsel, product, and engineering without reconstruction. Update the record when the product changes: a new settlement method, a new payment partner, or a new state can change the legal theory. When the next state asks why the product was live, the answer should be a dated file with the owner's name.