The City of Fort Powell, Dakota, was founded in the midst of the First Canadian War by British Loyalist prisoners of war who were forcibly relocated westward by the newly-formed Michigan Republic at the suggestion of William Mackenzie.
The Loyalists were supposed to be held for the duration of the war, however due to still-high diplomatic tensions over the short lived "joint occupation" of Upper Canada and the general administrative chaos following the war, the Loyalists were not free to go until 1841. By then, the "prisoners" were settled throughout the area and numbered in the tens of thousands. For the most part, the were there to stay.
Dissent grew amung the Powellites until finally, in 1842, they contacted the British about the possibilities of a British-backed rebellion in Wisconsin Territory. The Powellites began arming up.
This rebellious movement was soon detected by the Michiganians, who were terrified. There was, for a short time, serious consideration of a preemptive strike. Luckily for (almost) everyone involved, Mason chose to reconsider.
He issued what is now known as the "Compromise Ultimatum". It breaks down to essentially this; We'll give you Commonwealth status within Michigan, and you won't loose Britain on us.
This deal seems quite unfair at first glance. Britain was astronomically more powerful than Michigan, and both parties knew this. The only real bargaining chip that Michigan had was its assured victory in the field against the rebels. After all, it would take years for any substantial British force to reach Fort Powell. With this taken into account the Ultimatum reads more like this; "Give us what we want and you'll live relatively undisturbed , or fight and die, leaving your settlement under military occupation.
Baden Powell (the rebel leader), ever the pragmatist, agreed to the Ultimatum. On July 21st, 1843, Dakota became the sixth state to join the Republic of Michigan.
-----------From Forging the Republic by Johnathon Sykes, historian.