TLDR
- A federal judge in Michigan denied preliminary injunctions for both Polymarket and Robinhood
- Judge Paul Maloney ruled sports-event contracts are likely not “swaps” under the Dodd-Frank Act
- The court found no clear congressional intent to override state gambling laws
- The rulings conflict with a February Tennessee decision that favored Kalshi
- A Sixth Circuit split is growing, with oral arguments scheduled for July 30
A federal judge in Michigan has denied requests by Polymarket and Robinhood to block state regulators from enforcing gambling laws against their sports prediction market products.
Judge Paul Maloney of the Western District of Michigan issued two nearly identical rulings on June 17. He concluded that neither company had shown a strong enough legal case to justify a preliminary injunction.
Both companies had argued their sports-event contracts qualify as “swaps” under the Commodity Exchange Act. If true, that would place them under federal oversight by the Commodity Futures Trading Commission, not state gambling regulators.
Maloney rejected that argument.
Sports Contracts Are Not Swaps
The judge said the word “swap” in the Dodd-Frank Act is legally ambiguous. He concluded that Congress did not intend to include sports-event contracts in that definition.
Dodd-Frank was passed after the 2008 financial crisis to regulate complex over-the-counter derivatives markets dominated by large financial institutions. Maloney said those markets had nothing to do with individuals placing small bets on football games.
“The primary issue it set out to solve had nothing to do with sports-related contracts,” Maloney wrote.
He also warned that accepting the companies’ broad reading of “swap” would expand federal authority far beyond financial markets. He said it could even pull in mortgages, service contracts, and prenuptial agreements.
Polymarket had filed suit in March against Michigan Attorney General Dana Nessel and other state officials. The company argued it was in “imminent and concrete danger” of state enforcement and that its products were lawfully regulated by the CFTC.
The court was not persuaded.
State Gambling Laws Still Apply
Maloney also rejected the idea that federal law silently overrides state gambling authority. He relied on a U.S. Supreme Court precedent, Bond v. United States, which says courts should not assume Congress intended to intrude on traditional state powers without clear language.
“There is no clear statement that Congress intended to supersede the states’ traditional role in regulating gambling,” Maloney wrote.
This is Polymarket’s second court loss in the United States in recent weeks. Earlier this month, the Nevada Gaming Control Board won a court order to shut down Polymarket’s operations in the state.
Polymarket is still fighting in Massachusetts and Minnesota. Minnesota recently became the first state to pass a law banning prediction markets outright.
A Growing Legal Split
The Michigan rulings add to a divide in federal courts. In February, a Tennessee judge ruled in favor of Kalshi, finding its contracts likely do qualify as federally regulated swaps. An Ohio judge reached the opposite conclusion around the same time.
That split could be addressed when the Sixth Circuit Court of Appeals hears oral arguments in the Tennessee case on July 30.
With over a dozen states now involved and the CFTC publishing new guidelines for prediction market operators, the legal fight shows no signs of slowing down.
