Kalshi’s Sports Betting Legal Workaround That Doesn’t Work in Michigan

By: Graham Barker / Edited By: Sofia Castilla

‍ ‍Kalshi is one of the largest, fastest-growing companies in the United States: prediction markets. Operating as a federally regulated exchange, Kalshi allows users to wager money on everything from political elections to next week’s gas prices to reality show winners. Most notably and frequently, though, Kalshi users are betting on sports. Whether or not Kalshi’s sports offerings count as betting, though, put the company under legal scrutiny. In Michigan, state law leaves some ambiguity on what constitutes a sports betting platform, but not enough for Kalshi to operate legally in the state.

In September 2025, sports bets accounted for 90% of the total trading volume on the platform, including bets on the NFL, NBA, college football, and more. In a sense, Kalshi acts as a sportsbook that happens to also offer other kinds of bets. But there’s one important difference between Kalshi and popular sportsbooks like FanDuel or DraftKings: Kalshi doesn’t set betting lines itself and doesn’t have a “house” that collects the sum of all bets and pays out the winning bets itself. Instead, Kalshi’s odds are represented by a percent-likelihood system, and the company claims it’s simply a market matching buyers and sellers who exchange futures contracts—not a betting platform, which doesn’t have a clear definition in Michigan law. The platform is not involved directly in the transactions; those are all between users. While most sportsbooks take their money directly from a user’s lost bet, Kalshi makes all its money from small fees on each transaction.

Continuing to operate in Michigan and every other state for now, Kalshi’s fee system makes it more attractive to consumers than sportsbooks and gives it a competitive advantage in the marketplace. It is also available to people under 21 in states where sports betting is legal, taking advantage of a population especially vulnerable to gambling addiction. Kalshi’s non-sports offerings, like those on politics or regarding wars, have their own potential legal issues that are already facing controversy.

Kalshi is currently federally regulated by the Commodity Futures Trading Commission (CFTC), instead of state gaming commissions which regulate traditional online sports betting. The company’s classification has allowed Kalshi to operate nationwide to this point, regardless of state regulations or bans on online sports betting. But recently, several individual states — including Michigan — have initiated separate legal challenges against Kalshi’s workaround of state gaming laws, claiming the site violates state-level sports betting laws. 

The crux of Kalshi’s legality lies in whether or not it is considered sports betting in Michigan. If classified as a sports betting platform, Kalshi would need to be regulated by the Michigan Gaming Control Board (MCGB) instead of federally. The MCGB has specified that gambling typically involves three elements: consideration (a wager), prize, and chance. Kalshi’s sports offerings involve all three, with voluntary wagers being placed on game results, prizes given to winners, and uncertain chances of winning. These three elements have been upheld as the key considerations in other Michigan betting cases, too. In cases such as F.A.C.E. Trading, Inc. v Department of Consumer and Industry Services (2006) and Attorney General v. PowerPick Player's Club of Michigan, LLC (2010), alternative quasi-betting activity was ruled against in favor of the state’s betting laws. Neither F.A.C.E Trading nor PowerPick fit the same definitions as traditional lottery games or gambling, but their fundamental functional similarities were enough for them to lose the cases and face stricter, state-level regulation.

Michigan’s Lawful Sports Betting Act (LSBA) was introduced in 2019 when online sports betting was first made legal in the state and offers an explanation of what counts as sports betting. But the LSBA definition is vague, and it leaves room for Kalshi’s workaround. The LSBA defines “sports betting” as “means to operate, conduct, or offer for play wagering … single-game bets, teaser bets, parlays, over-under … ,” and uses the “betting” and “wagering” interchangeably without explicitly defining what constitutes a bet or a wager. This ambiguity is a key weakness in Michigan law which allows Kalshi to claim it’s not acting as a sportsbook in the state. The LSBA does, however, define “internet sports betting account” as an “electronic ledger” involving deposits, credits, withdrawals, and monetary value of winnings — criteria met by Kalshi accounts. Despite ambiguity in the LSBA, Kalshi still fits Michigan’s classification of a sports betting platform and should be regulated as such. 

In Michigan’s lawsuit, the state argues that Kalshi’s sports offerings align with those of a typical sportsbook; Kalshi offers over-under bets on the total score of a game or a player’s points scored, and offers spread bets on how much one team is likely to win a game by. These are all the same options available to a user of a traditional online sportsbook. The transaction uses a different internal mechanism, but money is still being risked, won, and lost the same, with Kalshi profiting immensely.

Another point in Michigan’s favor is Kalshi’s history of advertising itself as a gambling platform. Ads for Kalshi in 2025 used the words “odds” and “bet” in them, terms traditionally associated with gambling instead of financial trading. It also ran a text advertisement on Google, reading “Join Kalshi now! Bet on NBA legally!” and positioning itself as a legal sports betting option. Kalshi’s advertising terminology has since changed, possibly due to the uptick in legal scrutiny surrounding the company. Now, the company more frequently uses “trade” to describe the platform’s activity, shying away from “odds” and “bet.” Despite Kalshi reframing its advertising language, the company hasn’t made any other fundamental changes to their offerings. So regardless of the change, Kalshi still operates as a sports betting platform.

Kalshi’s current activity may prompt an update to Michigan’s LSBA or encourage new legislation for prediction markets, but Kalshi currently is not legal under existing Michigan state law. Due to the LSBA’s definition of internet sports betting accounts, precedent set by similar cases in the state, and the nature of the sports offerings on the platform, Kalshi is functionally and legally analogous to traditional online sportsbooks in Michigan. Thus, Kalshi’s sports offerings are already enough for Michigan to force the platform to either change its ways or shut down its currently illegal activity.