Kalshi Faces Aug. 12 Geofencing Deadline in Michigan as Its State-Blocking Record Comes Under Scrutiny
A Michigan circuit court judge extended her temporary restraining order against Kalshi’s sports contracts on Monday and set a hard deadline.
The platform must implement proper geofencing of the state by August 12 or face fines of $500,000 per day. Judge Rosemarie Aquilina gave Kalshi 30 days, quadruple what the state had requested, acknowledging the technical complexity involved. She also made it clear that waiting until the 29th day would result in sanctions. “If you sit on it for 29 days, there will be sanctions,” she said.
The decision lands as Kalshi’s geofencing record in the only other state that has enforced a similar ban, Nevada, faces contempt proceedings. Nevada regulators allege that state investigators successfully purchased prohibited event contracts on Kalshi’s platform eight times across four days in late May and early June, even without using VPNs to disguise their locations. The Nevada Supreme Court denied Kalshi’s emergency motion for a stay pending appeal on July 2. A full-day evidentiary hearing on contempt is scheduled for July 16.
Together, the two cases reveal a pattern: Kalshi has argued that proper geofencing is prohibitively expensive, built something cheap instead, and found that what it built does not work.
Kalshi Took a Backwards Approach to Apply Geofencing in Michigan
The geofencing dispute turns on a technical distinction that the online sports betting industry resolved years ago. Licensed sportsbooks use a combination of GPS data, device identifiers, and IP addresses, typically through third-party providers like GeoComply, to verify a bettor’s physical location before accepting a wager. The system works reliably enough that it has become the industry standard across all 30-plus states with legal online sports betting.
Kalshi has not used that system. When courts first ordered it to block Michigan, it used customers’ sign-up addresses to restrict access. This means a Michigan resident visiting another state may be blocked from trading, while a visitor from another state who is physically in Michigan can trade freely. That is the opposite of what a location-based restriction is supposed to accomplish. It restricts people based on where they registered, not where they are, which essentially makes zero sense.
When Nevada ordered geofencing, Kalshi built its own in-house tool for $190,000, relying primarily on IP address data. IP-based location detection is notoriously unreliable at the state level: Nevada estimates its success rate at 55%-80% without VPNs, and investigators were able to make purchases within Nevada without any circumvention tools. Nevada has called this a “flagrant violation” and argued Kalshi’s compliance approach is a deliberate strategy to feign compliance while continuing to collect revenue.
In Michigan, GeoComply Senior Vice President Chad Kornett testified that his company can typically implement geofencing in one to two weeks, and that most of that time is on the customer side rather than GeoComply’s. Kalshi’s lawyer acknowledged that the company had been working with GeoComply for only three to four days at the time of the hearing and could not provide a timeline.
The State Claims the Delays Are Simply About Money
The most direct argument Michigan’s assistant attorney general Lauren Fitzsimons made was not about legal theory. It was simply about money. Over the 30 days leading up to the hearing, Kalshi processed $30 billion in trading volume, generating more than $10 million in daily fee revenue during the World Cup. The daily fines Kalshi would have faced for non-compliance with the original blocking order were $120,000 per day. Fitzsimons argued the arithmetic was obvious.
“Part of why Kalshi is trying to drag this out is the World Cup,” she said. “Kalshi is incentivized to drag this out and avoid geofencing for as long as possible because it is financially beneficial to do so.”
Judge Aquilina accepted the basic logic. Her $500,000-per-day post-deadline fine reflects the gap: at that level, non-compliance becomes genuinely costly relative to revenue, rather than a cheap option to continue operating while the legal arguments develop.
The same financial structure applies in Nevada, where the NGCB’s contempt filing seeks disgorgement of revenue generated during the alleged non-compliance period. The states have identified the same problem: the fines originally attached to non-compliance were calibrated to a different platform scale than Kalshi has become.
Kalshi is Seemingly Complicating the Geofencing Issue
Every licensed online sportsbook in the United States uses real-time geolocation to verify a bettor’s physical location before accepting a wager. The technology is mandatory, well-established, and commercially available. GeoComply alone serves the vast majority of the licensed market.
The argument that real geofencing would cost Kalshi tens of millions of dollars has been met with skepticism from geolocation experts, who note that the question is not how much it costs to build a geolocation tool from scratch, but how much it costs to license one that already works. Several experts quoted in industry coverage put the realistic cost well below Kalshi’s estimates.
Kalshi’s stated reason for not using commercial geofencing products is that doing so might conflict with CFTC rules requiring impartial access to designated contract markets. That argument did not persuade Judge Aquilina, who found that conflict preemption did not apply because Kalshi can comply with both state and federal law simultaneously. The Michigan federal court reached the same conclusion in Judge Maloney’s June 17 opinion on Polymarket’s motion for a preliminary injunction. The argument is losing in every forum where it is being tested.
The Sixth Circuit in Cincinnati Could be a Turning Point
The Sixth Circuit oral arguments scheduled for July 30 in Cincinnati will address the underlying preemption question in a more authoritative forum than any state court has yet reached. A Sixth Circuit ruling in the states’ favor would significantly strengthen the enforcement picture. One in Kalshi’s favor would give the platform new ammunition for challenging the state court orders it is currently operating under.
What the Michigan and Nevada proceedings establish, regardless of how July 30 resolves, is that courts are willing to use their contempt and penalty powers to enforce compliance even when the underlying legal questions remain open. The $500,000-per-day figure in Michigan and the disgorgement request in Nevada are not symbolic. They are calibrated to make continued non-compliance economically irrational at any reasonable estimate of the actual geofencing costs. For a company earning $10 million per day in fees during the World Cup, the question of whether geofencing is feasible is increasingly a business decision rather than a technical one.
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