TRO, Preliminary Injunction, Contempt: The Escalation Ladder States Use

State enforcement actions against prediction-market operators do not move in one step. Under Federal Rule of Civil Procedure 65, and the near-identical state-court equivalents most states use, a court can issue a temporary restraining order (TRO) without notice to the other side only where specific facts show immediate and irreparable harm, followed later by a preliminary injunction that requires notice and a hearing before it can issue.

That two-step structure is deliberate. A TRO is meant to freeze a situation immediately and briefly, while a preliminary injunction is a more considered order meant to hold until a case is fully resolved, and the two carry different procedural requirements precisely because they serve different purposes.

Michigan Attorney General Dana Nessel's case against Kalshi followed this ladder closely. She filed suit in Ingham County Circuit Court on March 3, 2026, and obtained a TRO from Judge Rosemarie Aquilina in June barring KalshiEX from offering sports-event contracts, taking deposits, advertising, or opening new Michigan accounts.

After an August 17, 2026 evidentiary hearing, Judge Aquilina converted that TRO into a preliminary injunction on September 1, 2026, finding Michigan residents face immediate and irreparable harm from what she called a "sports betting operation masquerading as an investment opportunity." The order cited Kalshi's acceptance of 18-to-20-year-old bettors below Michigan's 21-year gambling minimum, lost funding for schools and tribal revenue-sharing, and disregard of tribal sovereignty, and it requires Kalshi to geofence Michigan users through a state-licensed provider or face a $500,000-per-day penalty.

An injunction is only as strong as a court's willingness to enforce it, and civil contempt is the tool for that enforcement. A coercive civil contempt sanction, most commonly a daily fine, is prospective rather than punitive: it applies for as long as noncompliance continues and lifts as soon as the party complies, rather than punishing a past violation the way a criminal sanction would.

Nevada's experience with Kalshi shows how this plays out in practice. After a May 18, 2026 injunction ordered Kalshi to geofence the state, Nevada investigators reported completing prohibited event-contract purchases from inside the state eight times across four days that same month, prompting a contempt motion. Kalshi settled that motion in late July by agreeing to deploy a more robust, multi-source geofencing system by August 12 or face $120,000 in daily penalties, and the dispute reignited even after that deadline when Nevada said investigators again completed prohibited purchases.

Washington took a different approach to the same underlying problem: rather than waiting for a violation and then filing a contempt motion, King County Superior Court Judge John McHale's August 13, 2026 order against Kalshi built the penalty into the injunction from the start. It set a $120,000-per-day penalty for missing either of two staged deadlines, an initial IP-and-residency geofence by August 19 and a fuller multi-source verification system by September 2.

That structural choice, a penalty clause built into the injunction rather than reserved for a future contempt proceeding, gives an operator less room to argue a violation was inadvertent or that it deserves a separate hearing before a fine attaches. It is a harder-edged version of the same underlying tool Nevada reached for only after Kalshi's geofence had already failed in practice.

A headline reporting a "court order against Kalshi" is not informative on its own until it is clear which rung of the ladder that order occupies. A TRO is provisional and can be dissolved or superseded within weeks, a preliminary injunction is a more durable order meant to last through final judgment, and a contempt finding or built-in penalty clause is what gives either kind of order real financial teeth.

For compliance teams tracking this litigation across states, the practical lesson from Michigan, Nevada, and Washington is the same: courts are converging on staged deadlines and daily-penalty structures as the default enforcement mechanism, whether reserved for a later contempt motion or written directly into the injunction, and an operator's geofencing implementation is increasingly the specific thing being measured against those deadlines.