Less than 48 hours after Michigan’s Attorney General sued Kalshi, the prediction market platform’s competitor Polymarket took legal action of its own against the state’s chief legal officer.
Polymarket filed a lawsuit in the U.S. District Court for the Western District of Michigan against Michigan AG Dana Nessel, Michigan Gaming Control Board (MGCB) Chair Jim Ananich and other members of the regulator to prevent the enforcement of Michigan’s gambling laws on prediction markets offering sports contracts.
After Nessel sued Kalshi in state court this week, claiming that its sports contracts constitute “unlicensed gambling”, Polymarket alleged in its federal court filing that it is in “imminent and concrete danger” of facing enforcement action from Michigan.
Polymarket points to CFTC regulation
Polymarket claims that any such enforcement action by the state would violate its position as a designated contract market (DCM) under the exclusive regulation of the Commodity Futures Trading Commission (CFTC).
In its suit against Nessel and Ananich, Polymarket states the familiar argument that Commodity Exchange Act (CEA) gives the CFTC regulatory authority over prediction markets and event contracts, resulting in Michigan’s laws and gaming regulator not having jurisdiction over the products.
Polymarket therefore claims that “any enforcement action by Michigan would be meritless.”
The prediction market also points to CFTC Chair Michael Selig’s approach to regulating prediction markets as he reiterates the agency’s complete authority over event contracts.
Polymarket’s suit in Michigan also notes the CFTC filing an amicus brief in a lawsuit involving Crypto.com in the U.S. Court of Appeals for the Ninth Circuit, joining the case as an advocate of federal regulation of event contracts. Selig also wrote an op-ed providing background on why the CFTC was joining the Crypto.com case and why prediction markets should only have to adhere to regulatory standards set by the CFTC. Polymarket also cited that op-ed in its filing.
Polymarket claims it faces ‘threat’ of enforcement
Polymarket considers Michigan’s suit to be pushback against the CFTC’s authority, and wrote that it believes Michigan’s legal action against Kalshi poses a threat to the company that is “immediate and concrete.”
“This action demonstrates defendant’s willingness to use state law to shut down federally authorized markets despite clear federal preemption,” claims Polymarket in its suit.
Polymarket alleges that Michigan’s enforcement of its gambling laws against prediction markets would expose the company to penalties and a potential shuttering of operations.
“The resulting harm would be irreparable,” claims Polymarket. “The chilling effect on lawful activity and the deprivation of Michigan residents’ access to a federally regulated exchange is precisely the harm Congress sought to prevent.”
Polymarket is seeking declaratory and injunction relief in its case against Nessel and other officials to “prevent unlawful state overreach, preserve the integrity of the federal regulatory framework, and avert imminent harm that cannot be remedied after the fact.”
Michigan AG’s suit against Kalshi
Polymarket is taking a proactive legal approach to combating state regulation of prediction markets after Nessel filed a lawsuit in Michigan state court against Kalshi. Nessel is suing Kalshi before the MGCB or her office sent any enforcement notice to the company.
Nessel is seeking a permanent injunction to prevent Kalshi from delivering sports contracts to Michigan residents and visitors, as she equates them to sports wagering, which would require Kalshi and other prediction markets to obtain sports betting licenses.
The MGCB previously sent a notice to licensed operators and suppliers in the state about exploring entering prediction markets and announced it was initiating an investigation into “unlicensed sports prediction markets operating within the state,” but neither the MGCB nor the AG’s office has issued a cease-and-desist order to Kalshi or Polymarket.
Polymarket made similar move in Massachusetts
Polymarket also went on the offensive in Massachusetts last month by suing the state’s attorney general in a similar bid to prevent the state enforcing state gaming laws against it.
The prediction market filed suit in Massachusetts after a state judge denied Kalshi’s emergency motion to stay a preliminary injunction in Massachusetts sought by Attorney General Andrea Joy Campbell and the Massachusetts Gaming Commission. As in the Michigan case, Polymarket claimed that Massachusetts’ action against Kalshi posed a threat to its own business.
Polymarket is also in a legal dispute in Nevada, with a judge recently granting the Nevada Gaming Control Board’s request for a temporary restraining order to prevent Polymarket from offering sports contracts while a lawsuit between the two parties continues.
