Kalshi settled its Western Michigan versus Michigan sports market before the game concluded, paying traders who had backed Western Michigan before reversing the payouts minutes later.
The market had traded $18.6 million in volume by the time the result became final. Traders on both sides experienced balance changes twice within minutes as the exchange corrected its error.
How the Settlement Error Occurred
Michigan trailed 12-7 when the clock showed zero following an incomplete Hail Mary attempt. Western Michigan players had already run onto the field in celebration.
Officials then reviewed the play and ruled that a Western Michigan defender had touched the ball while out of bounds. One second remained on the clock.
With that second restored, Michigan quarterback Bryce Underwood threw a 47-yard touchdown to JJ Buchanan, giving Michigan a 13-12 victory.
Kalshi had already treated the zeroed clock as final and paid out to Western Michigan backers before reversing those payouts. The exchange then reimbursed those initially marked as losers and paid the correct winners.
Impact on Prediction Markets
The settlement failure comes five days after a Michigan court ordered Kalshi to block state residents from accessing sports-related event contracts, with a $500,000 daily penalty for non-compliance.
Kalshi corrected the payouts within hours, but the incident highlights operational risks in prediction markets as they expand into sports betting. Whether the exchange publishes details about the settlement rule that failed will be significant for user confidence and regulatory scrutiny.
This follows a similar issue in July when Coinbase distributed an artificial intelligence-generated World Cup result to users before the game began. Coinbase routes its prediction product through Kalshi.
