A federal judge in Michigan ruled that sports-related prediction market contracts offered by Polymarket do not fall under the Commodity Futures Trading Commission’s authority, adding weight to state regulators’ efforts to classify the products under sports betting laws.
The ruling stems from a dispute between Polymarket and Michigan regulators over the legal status of the operator’s sports event contracts. State officials argue that the contracts offered to Michigan residents constitute sports betting under state law.
Judge Paul L. Maloney of the US District Court for the Western District of Michigan denied Polymarket’s request for a preliminary injunction that sought to prevent state regulators from blocking the contracts.
In his decision issued Wednesday, Maloney rejected the company’s argument that the sports event contracts should be treated as swaps subject to federal oversight.
“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 judge also questioned whether Congress intended legislation enacted following the 2008 financial crisis, including the Dodd-Frank Act, to transfer authority over sports-related wagering from state regulators.
The CFTC, along with Polymarket and other prediction market platforms, has long maintained that the contracts offered on these markets are financial derivatives traded on an exchange.
State regulatory agencies, however, have increasingly disputed that position, arguing that sports event contracts closely resemble sports wagering products.
The Michigan ruling follows another court decision earlier this month in Nevada, where a judge blocked Polymarket from operating in the state based on the same premise that its sports event contracts constitute sports betting under state law.
Under President Donald Trump’s second administration, the CFTC has claimed that it has the authority to regulate prediction markets under existing laws. In recent months, the CFTC has gone as far as to sue several states attempting to curb the proliferation of prediction markets.
The matter is likely to ultimately be decided by the U.S. Supreme Court.