A federal judge in the state of Michigan has determined that the prediction market contracts related to sports events provided by Polymarket are not governed by the Commodity Futures Trading Commission (CFTC), thereby enhancing the efforts of state regulators to categorize these products under existing sports betting regulations.
This ruling arises from a legal disagreement between Polymarket and Michigan authorities concerning the classification of the operator’s sports event contracts. State officials maintain that these contracts represent sports betting according to Michigan law.
Judge Paul L. Maloney, serving on the US District Court for the Western District of Michigan dismissed Polymarket’s request for a preliminary injunction aimed at stopping state authorities from prohibiting these contracts.
In his ruling released on Wednesday, Maloney rejected the argument put forth by Polymarket that the sports event contracts should be characterized as swaps and thus fall under federal regulation.
“The plaintiff’s expansive view of what defines derivatives could potentially include numerous activities that have no historical ties to the financial sector, instead aligning more closely with fundamental state responsibilities,” Maloney stated.
The judge further questioned whether Congress intended for the legislation enacted in the aftermath of the 2008 financial crisis, including the Dodd-Frank Act, to shift control of sports wagers from state organizations.
The CFTC, along with Polymarket and similar prediction market platforms, has long asserted that the contracts available on these markets are financial derivatives traded on an exchange.
Nevertheless, state regulatory bodies are increasingly contesting this claim, arguing that sports event contracts closely resemble traditional sports wagering products.
This Michigan ruling follows another court’s decision earlier this month in Nevada, where a judge prohibited Polymarket from conducting business in the state on similar grounds, stating that its contracts constitute sports betting as per state law.
During President Donald Trump’s second term, the CFTC asserted its authority to regulate prediction markets based on existing legislation. In recent months, the CFTC has even initiated lawsuits against several states attempting to limit the expansion of prediction markets.
Ultimately, the dispute is anticipated to be resolved at the U.S. Supreme Court level.