Polymarket received an unfavorable ruling by a Michigan court in the prediction market’s attempt to keep its sports event contracts available to residents and visitors in the state in the immediate term.
On Tuesday, U.S. District Judge Paul L. Maloney denied the prediction market platform’s motion for a temporary restraining order (TRO) in its legal dispute against Michigan state officials.
Last week, Polymarket preemptively filed a lawsuit in the U.S. District Court for the Western District of Michigan against State Attorney General Dana Nessel, attempting to stop Michigan from enforcing state gambling laws on prediction markets that offer sports event contracts. Polymarket sued in federal court immediately after Nessel filed a lawsuit in state court against Kalshi last week.
In the suit against Kalshi, Nessel claims that sports event contracts constitute “unlicensed gambling.” In response, Polymarket argued in federal court that sports event contracts fall under federal regulation from the Commodity Futures Trading Commission (CFTC).
Polymarket alleged the Kalshi lawsuit demonstrated that it faced “imminent and concrete danger” of enforcement action in Michigan and that any attempt from the state to launch such action would result in “irreparable” harm for the company and a potential shuttering.
Why was Polymarket’s motion for a TRO denied?
Polymarket sought declaratory and injunction relief to “prevent unlawful state overreach, preserve the integrity of the federal regulatory framework, and avert imminent harm that cannot be remedied after the fact.”
However, Maloney’s ruling was rooted in Polymarket’s failure to show that enforcement action would result in “immediate and irreparable injury” as the defendants have yet to be heard.
“One difference between the analyses of a motion for a TRO and one for a preliminary injunction is the requirement in Rule 65 that the moving party provide ‘specific facts’ showing that irreparable injury will result ‘before the adverse party can be heard in opposition,’” reads Maloney’s filing.
Maloney also rules that Polymarket failed to provide evidence of Nessel and Michigan officials planning to take enforcement action against the prediction market, “specifically in the coming days,” providing a lack of clarity about whether Nessel would actually bring enforcement action against Polymarket as her case against Kalshi continues.
“The threat of prosecution plaintiff [Polymarket] cites is currently in the realm of the hypothetical rather than so immediate as to warrant relief before defendants can respond.”
Maloney also points to language concerning prediction markets and event contracts, with Polymarket claiming that its event contracts fall under the definition of “swap” in the Commodity Exchange Act, which the CFTC leverages to regulate prediction markets.
“If this is true, then the rest of plaintiff’s preemption theory builds naturally from there: other parts of the legislation would expressly preempt state laws… and there would be evidence that Congress intended to occupy the field of event contract regulation and that state laws could conflict with federal law,” reads the ruling.
Maloney also acknowledges that Polymarket’s motion for a TRO failed to provide evidence as to why the definition of swaps should cover event contracts. The judge also mentioned the open interpretation of an “event” and how it does not include outcomes or results.
“The term does have common usages that allow it to mean essentially anything that happens,” continues Maloney. “Based on plaintiff’s arguments, the court sees no logical way to interpret the term event consistent with plaintiff’s position without extending its reach to any and all things that happen.”
While the TRO was denied, Polymarket’s motion for a preliminary injunction is still under consideration and will proceed. Maloney’s consideration of a preliminary injunction will include an opportunity for Nessel to be heard.
Polymarket is also suing Massachusetts AG
Polymarket was also proactive in Massachusetts by filing a lawsuit against state Attorney General Andrea Joy Campbell and the Massachusetts Gaming Commission (MGC). The company sued after a judge denied Kalshi’s emergency motion to stay a preliminary injunction in the Bay State brought by Campbell and the MGC.
Polymarket is also in court in Nevada.
Last month, a judge granted the Nevada Gaming Control Board’s (NGCB) request for a TRO to prevent Polymarket from offering sports event contracts while its lawsuit with the regulator continues. The NGCB sued Polymarket’s corporate entity for providing “unlicensed wagering in violation of Nevada” through the delivery of sports event contracts.
