Kalshi settled its Western Michigan versus Michigan market before the game ended, paying traders who backed the losing team. The exchange then clawed that money back.

The market had traded $18.6 million by the time the result became final. Traders on both sides watched their balances move twice in the space of minutes.

How Kalshi Settled the Michigan Game Too Early

Michigan trailed 12-7 with the clock reading zero after an incomplete Hail Mary attempt. Western Michigan players had already run onto the field to celebrate.

Officials then reviewed the play and ruled that a Western Michigan defender touched the ball from out of bounds. One second still showed on the clock.

That second was restored and quarterback Bryce Underwood threw a 47-yard touchdown to JJ Buchanan, and Michigan won 13-12.

Kalshi had already treated the zeroed clock as the final state. It paid the Western Michigan side, then reversed those payouts. It reimbursed the wrongly marked losers and paid Michigan holders last.

Kalshi’s own sports account had spotlighted one $2,265 Western Michigan position during the game. It stood to pay $93,201.

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“Kalshi confirms they wrongly and prematurely settled the “Western Michigan vs. Michigan” market, as if Michigan lost. They clawed back payments to initial incorrect “winners,” reimbursed the initial “losers,” and then paid the right people. (This market saw $18.6m volume.)” Marshall Cohen of CNN noted.

Why the Settlement Error Matters for Prediction Markets

The result Kalshi eventually paid out on is itself disputed. NBC rules analyst Terry McAulay questioned how officials arrived at one second.

“The ball isn’t even close to touching a player when it goes to zero,” CBS reported, citing Terry McAulay, NBC rules analyst.

BeInCrypto flagged a similar failure in July. Coinbase pushed an AI-generated World Cup result to users before kickoff. Coinbase routes its prediction product through Kalshi.

The timing is also awkward, coming after a Michigan judge barred Kalshi from offering sports contracts inside the state on September 1. That order carries a $500,000 daily penalty.

Five days later, the exchange misfired on a Michigan football market. Prediction markets are already colliding with sports law, and critics now have a concrete settlement failure to cite.

Kalshi fixed the payouts within hours, but whether it publishes the source and timing rule that failed will matter more than the refund.

Source: BeInCrypto