State gambling regulators scored another win in the prediction market fight after a Michigan federal judge refused to block enforcement against Polymarket sports contracts.
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Polymarket wanted federal law to shield its sports event contracts from Michigan gambling enforcement. Judge Paul L. Maloney did not agree.
The U.S. District Court for the Western District of Michigan denied the company request for a preliminary injunction. That means Michigan regulators can keep pressing their case that sports contracts offered to residents fall under state sports betting law, not only federal derivatives rules.
The decision lands at a tense point for prediction markets. Platforms such as Polymarket argue that event contracts trade as financial derivatives on an exchange. State regulators see a different product when the contract turns on a sports result: a bet that should need a local gambling license.
Maloney took direct aim at the reach of the derivatives argument.
“Plaintiff’s vision of the scope of derivatives is so vast that it would encompass vast swaths of activity never understood to be associated with the financial industry and instead traditionally associated with core state, as opposed to federal, responsibilities,” Maloney wrote.
The case also puts the Dodd Frank Act back in focus. Congress passed that law after the 2008 financial crisis to tighten financial market oversight. Polymarket leaned on the idea that its sports contracts fit under federal commodity and swap rules.
Maloney questioned that reading. In plain terms, the court did not see a clear reason to treat sports wagering authority as something Congress handed from state gambling regulators to the Commodity Futures Trading Commission.
That point matters for CFTC regulated prediction markets, Kalshi, Polymarket, and similar event contract platforms. If courts keep siding with states, platforms may need to deal with gambling regulators market by market, even while arguing that federal law covers their exchange model.
The CFTC has taken the opposite view under President Donald Trump second administration. The agency claims authority over prediction markets under existing law and has pushed back against states trying to limit sports event contracts.
Michigan is not alone. Earlier in June, a Nevada judge blocked Polymarket from operating in the state after regulators argued that its sports event contracts amount to sports betting under Nevada law.
Massachusetts also became part of the wider fight through litigation involving sports event contracts and state gaming rules. Across those cases, one legal question keeps coming back: does a sports outcome contract become a federally regulated derivative, or does it remain gambling when offered to customers as a sports market?
For states, the answer affects licensing, age checks, responsible gambling controls, tax collection, and consumer protection. For prediction market operators, the answer affects whether one federal framework can support nationwide sports contracts.
A final answer may come from the U.S. Supreme Court. Until then, Michigan gives state regulators another case to point to when challenging sports prediction markets.