Published on: June 19, 2026, at 01:22h.

Updated on: June 19, 2026, at 01:22h.

• Michigan court dismisses Polymarket and Robinhood’s request to halt state gambling enforcement
• Judiciary explores if sports-event contracts are federally recognized swaps
• Decision intensifies the legal uncertainty regarding prediction markets and sports betting

The expansion of the prediction-market industry, valued in the billions, into the sports sector relies on a contentious legal assertion: that sports contracts are federally recognized financial derivatives. This stance, however, was met with skepticism by a federal judge in Michigan on Thursday.

Judge Paul L. Maloney rejected the motions by Polymarket and Robinhood seeking preliminary injunctions to prevent Michigan from enforcing its gambling policies during ongoing litigation.

In March, Michigan Attorney General Dana Nessel and the Michigan Gaming Control Board filed a lawsuit against Kalshi, asserting that its sports contracts constitute unlicensed sports betting as defined by Michigan law.

The state’s argument asserts that companies cannot evade gambling regulations merely by renaming bets as event contracts. Observing these developments, Kalshi’s competitors, Polymarket and Robinhood, preemptively initiated legal action.

Cautious Court Assessment

In a strongly articulated opinion, Maloney stated there was “no explicit declaration that Congress aimed to override the states’ traditional authority in gambling regulation” within the Commodity Exchange Act (CEA).

Advocates for prediction platforms maintain that the CEA grants the Commodity Futures Trading Commission (CFTC) exclusive jurisdiction over sports-event contracts, thereby insulating them from state gambling regulators.

“When a federal law pertains to ‘areas of traditional state authority,’ courts must seek a clear indication from Congress that it intended to alter the delicate balance between federal and state powers,” Maloney elaborated.

This essentially implies that if these sports contracts are encompassed by the CEA, what explicit direction did Congress provide indicating that states relinquish their enduring authority to oversee gambling?

The Dodd-Frank Act, a 2010 reform act, modified the CEA following the financial crisis of 2008 and expanded federal oversight regarding derivatives markets, including precise definitions of swaps.

Dodd-Frank was introduced to regulate intricate financial derivatives linked to the crisis. Maloney expressed skepticism about Congress intending for this to encompass everyday individuals wagering on football matches.

“The plaintiffs envision the scope of derivatives as so extensive it would incorporate numerous activities that are not traditionally associated with the financial sector but rather linked with core state responsibilities,” he noted.

Judicial Discrepancies

The Michigan ruling adds another layer to the ongoing legal skirmishes throughout the US regarding the governance of sports contracts.

The judiciary is divided on this issue. In April 2025, a federal judge in Tennessee appeared more amenable to the viewpoint that sports-event contracts are under federal oversight. Conversely, a federal judge in Ohio determined in September 2025 that such contracts are more akin to gambling.

Maloney’s ruling is merely a denial of the injunction and not a conclusive decision on the legitimacy of sports event contracts.