Michigan Judge Says Sports Prediction Markets Outside CFTC Authority 

A federal judge in Michigan handed a significant defeat to Polymarket this week, ruling that wagers tied to sporting events do not qualify as swaps under the jurisdiction of the Commodity Futures Trading Commission (CFTC).

The decision came out of the US District Court for the Western District of Michigan, where Judge Paul L. Maloney rejected the request from one of the best prediction markets for a preliminary injunction against state regulators. 

Michigan officials had argued that the platform's sports-related contracts amount to illegal sports betting under state law. Polymarket countered that the products should fall under federal oversight as swaps regulated by the CFTC, thereby effectively shielding the company from state-by-state gambling restrictions.  

Maloney sided firmly with the state, writing that the CFTC's broad interpretation of its authority would sweep in activity that has traditionally belonged to state regulators rather than federal financial agencies. He added that lawmakers who wrote financial reform legislation after the 2008 crisis were not attempting to rewrite the balance of power between Washington and the states. 

The ruling adds to a patchwork of conflicting outcomes nationwide as prediction market platforms continue to clash with state gambling regulators. Within the Sixth Circuit alone, an Ohio judge sided with state regulators earlier this year, while a Tennessee judge backed prediction market apps.

The Sixth Circuit Court of Appeals is expected to take up the broader dispute soon, though most observers expect the issue to eventually land before the Supreme Court, given how unsettled the legal landscape remains across the country. 

Gambling industry pushes Congress to settle the fight

While courts remain split on the issue, the gambling industry is now taking its fight directly to lawmakers. A coalition of gaming organizations sent a letter to the Senate this week asking Congress to explicitly bar sports and casino-style prediction markets through pending digital asset legislation rather than leaving the matter to the courts. 

The letter was signed by groups including the American Gaming Association (AGA), the Indian Gaming Association, the Association of Gaming Equipment Manufacturers, and labor unions representing casino and hospitality workers. Their target is the Clarity Act, the crypto market structure bill that the Senate Banking Committee advanced last month and that now awaits a vote from the full chamber. 

The coalition contends that prediction markets have driven the largest expansion of gambling activity the country has seen in years, all without approval from voters or state legislatures. The letter also raised concerns that these platforms expose younger users to inadequate consumer protections while marketing gambling-style products as financial investments. The groups argued that the CFTC was never built to police nationwide sports wagering and lacks the expertise to do so effectively. 

The AGA has previously estimated that states have lost close to $1 billion in gambling tax revenue since the start of 2025, as bettors shift toward prediction market platforms rather than regulated sportsbooks.