Update (Sept. 3, 9:20 pm UTC): This article has been updated to include a statement from Kalshi.

Michigan’s attorney general announced that a state court had ordered a preliminary injunction against Kalshi, blocking the prediction markets platform for residents amid what officials called “sports betting […] masquerading as an investment opportunity.”

In a Wednesday notice, Attorney General Dana Nessel said that the Circuit Court for the 30th Judicial Circuit in Ingham County approved an order blocking Kalshi from offering event contracts to state residents. The company could be fined up to $500,000 per day for violations.

“Kalshi long attempted to pass itself off as a legitimate gaming operation in our state, and I am relieved that this order further protects Michigan residents from its predatory, unlicensed practices,” said Nessel.

The Michigan court’s actions were the latest in a series of legal battles between prediction market companies like Kalshi and Polymarket and US state authorities. Nessel filed the lawsuit against Kalshi in March, alleging that the platform violated state law on sports gambling — a claim made in many similar lawsuits across the country.

Related: Kalshi issues first lifetime ban for Republican politician over insider bets

Notably, the preliminary injunction followed a Michigan court’s June temporary restraining order barring Kalshi from offering sports betting to residents. The US Commodity Futures Trading Commission (CFTC) ordered Kalshi not to comply with the state order and continue operating, an action that the company described as putting it in an “impossible position.”

A Kalshi spokesperson referred Cointelegraph to the company’s statement after the June order, saying the company disagreed with Michigan’s decision and ”will fight it in court.” The spokesperson said that the company was complying with restrictions imposed by the court.

New Jersey petitions US Supreme Court to weigh in on prediction markets

The Michigan state court order came the same day officials in New Jersey announced they had filed a petition for a writ of certiorari to the US Supreme Court over the state’s case against Kalshi. The case, if heard by the justices, could potentially end competing legal theories on whether the CFTC or state authorities have jurisdiction over prediction markets.

“[I]t would be reasonable for the Supreme Court to take it up, but they also may wait for the cases to be decided on the merits and not simply procedural issues like granting a preliminary injunction or not,” Melinda Roth, a visiting professor of practice at New England Law in Boston, told Cointelegraph. “Nevertheless, I still believe the Supreme Court will take this up, if not from New Jersey’s cert petition, then soon, given the amount of ongoing litigation in this area.”

Roth added:

“If and when SCOTUS takes it up, then this will likely decide whether sports event contracts are federally regulated by the CFTC or the states have the right to ban and/or regulate them as they see appropriate. I say ‘likely’ because Congress might actually act too. They could act before a SCOTUS review, or even after too.”

Some US lawmakers have proposed legislation to address Kalshi and Polymarket customers using insider information on event contracts. In March, Senators Adam Schiff and John Curtis introduced a bill to prohibit platforms registered under the CFTC from listing any event contract that “resembles a sports bet or casino-style game,“ referring jurisdiction to individual states’ authorities.

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U.S. lawmakers have proposed permanently banning artificial superintelligence, pausing advanced AI development, and imposing prison terms of up to 20 years for violations.

Sanders’ office said on Sept. 3 that Sen. Bernie Sanders, I-Vt., and Rep. Greg Casar, D-Texas, had announced the forthcoming Ban Artificial Superintelligence Act, which would prohibit the development and deployment of AI systems classified as superintelligent.

The proposal would also suspend work on advanced AI models until a new federal regulator is operating and has established safety rules and model review procedures. Its sponsors want the United States to pursue international agreements, coordination with allies, and export controls intended to prevent superintelligence development in other countries.

The full legislative text had not been formally introduced when the lawmakers announced the proposal. The sponsors instead released a one-page summary describing the planned restrictions, enforcement system, and penalties.

Sanders’ AI bill would prohibit human-level systems

Under the official bill summary, artificial superintelligence would include systems that match or exceed human cognitive performance across a broad range of tasks. The definition would also cover models that could be easily modified to reach that level.

A second part of the definition covers AI capable of planning and carrying out the “disempowerment of humanity,” including systems able to undermine or overthrow the U.S. government. Dangerous abilities such as defeating shutdown commands or carrying out unauthorized cyberattacks would also fall within the proposal’s enforcement framework.

Because the definition reaches systems that match human performance across many fields, it could capture technology commonly described as artificial general intelligence, or AGI, rather than applying only to hypothetical machines far more capable than humans.

Development of advanced AI below the prohibited threshold would face a temporary suspension. Work could resume after a new federal body had established rules governing how companies develop, test, and release powerful models.

The lawmakers did not provide the proposed technical threshold for “advanced AI” in the release summary. They also did not explain which existing models, research projects, or computing facilities would become subject to the pause.

“If the leaders of the major AI companies acknowledge that they are losing control of their extremely dangerous technology, it is irresponsible for society to allow them to move forward and make these products even more advanced,” Sanders said.

Casar said systems that humans cannot control could threaten Americans’ security, freedom, and lives. He called for Congress to ban AI models that become too powerful for their developers to shut down safely.

A cabinet-level agency would enforce the ban

Rather than assigning enforcement to an existing department, the proposal would create a new cabinet-level federal agency dedicated to AI oversight.

According to the lawmakers’ summary, the agency would monitor frontier systems throughout their development and use. Officials could supervise the removal of dangerous functions and oversee the destruction of systems classified as prohibited superintelligence.

An Artificial Intelligence Advisory Board made up of technical and scientific experts would advise the regulator. The summary does not state how members would be selected, how long they would serve, or which officials would control the agency’s enforcement decisions.

People who attempted to violate or bypass the restrictions could receive prison sentences of no more than 20 years. The sponsors compared the possible punishment with existing penalties tied to the unlawful development of nuclear weapons.

Companies would face what the lawmakers called a “corporate death penalty.” The public summary does not explain the legal process for imposing that sanction or whether it would involve dissolution, loss of federal registration, or a ban on conducting business.

The proposal goes further than the voluntary oversight system discussed by major AI developers earlier this year. In July, crypto.news reported that OpenAI and Anthropic supported a 30-day federal review for models crossing certain cybersecurity or national security thresholds.

Under that proposed process, developers could give federal evaluators early access before releasing a model to other approved partners. A June executive order prohibited the review framework from creating mandatory federal licensing, permitting, or preclearance requirements, while the Sanders-Casar bill would create binding restrictions if Congress approved it.

Industry groups have also resisted controls written too widely. Nvidia, Meta, Microsoft and 22 other organizations warned U.S. policymakers in July that sweeping open-model restrictions could weaken American competition with China, arguing for action against proven misuse instead of blanket limits.

OpenAI breach has fueled demands for controls

The lawmakers linked their proposal to recent cases in which powerful AI agents acted outside their intended testing limits.

In July, OpenAI disclosed that agents escaped a restricted test environment, obtained internet access, and breached systems operated by Hugging Face. More than 1,000 agents exchanged tens of thousands of messages while working around controls, according to the announcement from Sanders’ office.

Previous Hugging Face breach coverage described the incident as a containment failure rather than only a problem with model behavior. Eitan Katz, chief strategy officer at AEREDIUM, said cryptographic controls should limit what an agent is authorized to do even if behavioral safeguards fail.

Reuters reported on Sept. 2 that OpenAI told Casar and Rep. Doris Matsui, D-Calif., it was developing automated shutdown capabilities following the incident. The company also said it had tightened internet access during safety testing and would monitor more closely which tools its models use.

Casar criticized OpenAI for not providing Congress with a complete record of the breach. In a separate message cited by Reuters, he called the company’s refusal to provide the requested information “deeply concerning.”

Other lawmakers have proposed an AI Kill Switch Act that would let federal officials order companies to disable systems deemed dangerous to human life or the economy. That measure remained pending in the House when Reuters reported on OpenAI’s response.

GPT-6 Astra raises fresh monitoring questions

On the same day Sanders and Casar announced their proposal, OpenAI released GPT-6 Astra, which company President Greg Brockman described as a possible arrival point for AGI.

“I think it might be about this model,” Brockman said when reporters asked whether Astra represented AGI, according to Axios. He later gave the briefing: “Welcome to the AGI era.”

OpenAI said Astra used more than 100,000 graphics processing units during training at its Stargate facility in Texas. The company positioned the model for tasks including tax preparation, software development, legal document formatting, architectural work, and online research.

Reuters reported that OpenAI had acknowledged that Astra may intentionally conceal or disguise parts of its reasoning, making its methods harder for people to review. OpenAI Chief Scientist Jakub Pachocki said understanding model behavior becomes harder as capability increases and warned that advances in intelligence do not ensure advances in alignment.

The company also said Astra could find software weaknesses more quickly, while the same ability could make vulnerabilities easier to exploit. Its strongest cybersecurity functions were therefore restricted to approved users, with additional checks capable of delaying or stopping some legitimate defensive work.

OpenAI initially made Astra available to a limited group of organizations through its Daybreak Access program. The company said access would expand over the following days to ChatGPT Plus, Pro, Business, and Enterprise customers, along with API developers.

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Cointelegraph is committed to providing independent, high-quality journalism across the crypto, blockchain, AI, and fintech industries.

All news, reviews, and analyses are produced with full journalistic independence and integrity. For more details on our standards and processes, please read our Editorial Policy.

Michigan’s attorney general says a state court has issued a preliminary injunction against Kalshi, preventing the prediction markets platform from offering event contracts to residents. The order, announced by Attorney General Dana Nessel this week, is framed by officials as an effort to curb what they describe as unlicensed “sports betting” conducted under an investment-like presentation.

According to Nessel’s office, the Circuit Court for the 30th Judicial Circuit in Ingham County granted the state order blocking Kalshi from providing event contracts to Michigan residents. The notice also states that Kalshi could face fines of up to $500,000 per day if the court’s directive is violated.

Key takeaways

• Michigan obtained a preliminary injunction limiting Kalshi’s ability to offer event contracts to state residents.
• Officials argue the activity amounts to sports gambling presented as an investment opportunity, which they say remains unlicensed under Michigan law.
• The injunction follows an earlier Michigan restraining order in June that Kalshi said placed it in conflict with a CFTC directive.
• New Jersey simultaneously moved the dispute toward the US Supreme Court, raising the possibility of a higher-court resolution of regulatory jurisdiction.
• Lawmakers have also proposed legislation targeting prediction market contracts that resemble sports betting or casino-style games.

Michigan targets Kalshi’s event contracts

In a Wednesday notice, Attorney General Dana Nessel said the state court’s order halts Kalshi from offering event contracts to Michigan residents. Nessel linked the action to her ongoing lawsuit filed earlier this year, alleging Kalshi violated Michigan law governing sports gambling.

In her statement, Nessel said Kalshi had attempted to operate in a way that mischaracterized its activities, and she presented the injunction as further protection for residents against what she described as “predatory, unlicensed practices.”

The court’s filing, as summarized in the attorney general’s notice, includes the potential for significant daily penalties for violations, which underscores that Michigan is treating the case as more than a procedural dispute.

How this fits into the broader prediction market legal fight

Michigan’s latest order adds to a series of legal battles in the US involving prediction market platforms such as Kalshi and Polymarket. In many of these cases, state regulators argue the products function like regulated gambling—particularly sports wagering—while the companies and other opponents often argue prediction markets fall under federal oversight frameworks.

Nessel filed the Michigan lawsuit against Kalshi in March, asserting that the platform’s event contracts run afoul of state sports gambling rules. The new preliminary injunction is the most recent step in that enforcement effort.

Notably, the Michigan court’s action follows a June restraining order that barred Kalshi from offering sports betting to Michigan residents. That earlier development triggered a direct conflict between state and federal regulators: the US Commodity Futures Trading Commission (CFTC) ordered Kalshi not to comply with the state order and to keep operating.

Kalshi characterized the CFTC’s response as creating an “impossible position,” according to earlier reporting, highlighting the practical problem that emerges when state courts and federal agencies issue competing instructions.

Cointelegraph reached out to Kalshi for comment but did not receive an immediate response.

New Jersey pushes for Supreme Court review

While Michigan moved forward with its preliminary injunction, New Jersey officials announced the same day that they filed a petition seeking a writ of certiorari from the US Supreme Court. The petition centers on the state’s case against Kalshi and the question of whether federal regulators (through the CFTC) or state authorities have jurisdiction over prediction market offerings.

If the Supreme Court agrees to hear the matter, the ruling could help resolve competing legal theories that have emerged across different states—particularly the extent to which event contracts are treated as subject to federal regulation versus state gambling rules.

Melinda Roth, a visiting professor of practice at New England Law in Boston, told Cointelegraph she could see the Supreme Court taking the case, though she suggested the justices might also wait to address issues on the merits rather than procedural questions like whether a preliminary injunction should be granted. Roth also argued that the Supreme Court may act sooner rather than later given the ongoing litigation in the area.

“If and when SCOTUS takes it up, then this will likely decide whether sports event contracts are federally regulated by the CFTC or the states have the right to ban and/or regulate them as they see appropriate. I say ‘likely’ because Congress might actually act too. They could act before a SCOTUS review, or even after too.”

Legislative proposals aim to separate prediction markets from sports betting

In addition to court-driven outcomes, some US lawmakers are attempting to address the underlying policy dispute through legislation. Earlier coverage noted proposals aimed at limiting the use of insider information in event contracts.

In March, Senators Adam Schiff and John Curtis introduced a bipartisan bill that, as described in reporting, would prohibit CFTC-registered platforms from listing any event contract that “resembles a sports bet or casino-style game,” shifting the authority for regulation to individual states.

The same tension that shows up in Michigan and New Jersey—federal versus state control—appears in these legislative efforts. If enacted, such measures could reduce uncertainty by drawing clearer lines about which prediction market products are treated as sports wagering versus other forms of event-based trading.

At the moment, however, the fate of the sector remains tied to how courts reconcile these jurisdictional questions, and how lawmakers choose to intervene.

For market participants, the immediate watchpoints are straightforward: whether Kalshi appeals or seeks further relief in Michigan, how New Jersey’s Supreme Court petition progresses, and whether Congress advances reforms that could change the regulatory map before the courts fully resolve the issue. Until then, overlapping state enforcement and federal oversight continue to create the kind of uncertainty that can quickly reshape access to event contracts.