Michigan Warns Licensees Against Involvement in Prediction Markets

The Michigan Gaming Control Board (MGCB) has cautioned Michigan sports betting operators that involvement in prediction markets could jeopardize their licenses. In a memo issued by Executive Director Henry Williams, the agency stated that participation in or affiliation with sporting event contracts could result in serious licensing consequences.

The notice marks Michigan as the third state, after Arizona sports betting and Ohio sports betting, to issue such a warning. The MGCB noted that prediction markets, which enable users to sell and purchase event-driven contracts, could be at odds with Michigan law regarding gaming and licensing.

The memo emphasized that any form of direct or indirect involvement, including affiliates or related companies, for the purpose of providing sporting event contracts, shall be evaluated for the fitness of a person to possess a license. You won't be seeing prediction market boosts offered by operators offering Michigan sportsbook promos.

Under Michigan statute, operators have a high duty of integrity, reputation, and financial sobriety, which is manifested through Michigan and out-of-state conduct. The MGCB made explicit that actions for affiliates, primary personnel, or partners would also be included in recurring licensing reviews. 

Operators are required to promptly notify the regulator of any significant changes in licensing information or business activity that could affect their suitability. The agency also stated that it would continue to monitor all licensees for activities involving unregulated sporting event contracts, both within Michigan and elsewhere. 

It warned that noncompliance could result in disciplinary action or loss of licensure.

Betting market leaders react as prediction markets rise

Following developments in the prediction market sector, the MGCB's warning coincided with a turbulent week for publicly traded sportsbook operators. DraftKings and Flutter Entertainment, FanDuel's parent company, saw their shares drop sharply after prediction market platform Kalshi introduced customizable parlay-style contracts, one of the key differentiators for online sportsbooks.

DraftKings' stock fell 11.59% to $37.40 per share last Tuesday, while Flutter declined 10.33% to $254.01, despite flat broader market indexes. Official sports data providers Genius Sports and Sportradar Group also saw losses of 7.86% and 5.81%, respectively.

Since then, the results have been more mixed. Flutter closed at $256.24 on Friday afternoon, for a slight uptick. DraftKings, however, closed at $35.25. Genius Sports and Sportradar Group closed at $11.94 and $26.42, respectively. 

Traditional casino operators with both online casinos and physical assets experienced smaller declines. Caesars Entertainment dropped 3.03% to $27.02, MGM Resorts International fell 5.12% to $34.66, and Penn Entertainment slipped 2.28% to $19.26. 

Kalshi, which claims to operate as a financial exchange rather than a gambling service, has drawn increasing scrutiny from regulators. The company recently expanded its sports-themed prediction markets nationwide, including in states where sports betting remains illegal, such as California and Texas. 

FanDuel announced a partnership with CME Group last week to develop a regulated prediction market platform, though it will initially exclude sports-related contracts.