Polymarket took another hit in Michigan on Wednesday as a federal judge denied the prediction market platform’s motion for a preliminary injunction against state officials.
In an order published on June 17, Judge Paul Maloney of the U.S. District Court for the Western District of Michigan determined that Polymarket failed to prove it would suffer immediate irreparable harm by ceasing operation in Michigan. He also wrote that the company has not met its burden to show a likelihood of success on the merits.
“Without a substantial chance of success on the merits, Plaintiff’s arguments about irreparable harm and the public interest fall flat — the risk that it will harm the public unlawfully outweighs the risk that it will suffer losses unlawfully,” wrote Maloney. “Plaintiff’s motion is thus DENIED.”
Polymarket felt threatened by Michigan …
Polymarket sued Michigan Attorney General Dana Nessel, Michigan Gaming Control Board (MGCB) Chair Jim Ananich, and other members of the gaming regulator in early March, less than 48 hours after Nessel and Co. went on the offensive with a lawsuit against Kalshi.
Polymarket alleged in its filing that it was in “imminent and concrete danger” of facing enforcement action from Michigan, which it said would violate its position as a federally authorized designated contract market (DCM) and contravene the Commodity Exchange Act and the Commodity Futures Trading Commission’s regulatory authority over prediction markets and event contracts.
“The resulting harm would be irreparable,” claimed 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.”
… But judge denied Polymarket a TRO
Maloney took just a few days to decide that Polymarket did not qualify for a temporary restraining order and to deny the company’s motion for immediate relief.
In that ruling, Maloney wrote that Polymarket’s claimed threat of prosecution was “hypothetical” rather than immediately palpable, noting that the company failed to provide evidence that Nessel and Michigan officials were planning to take enforcement action.
In Wednesday’s decision on the preliminary injunction motion, Maloney noted that a preliminary injunction is an “extraordinary remedy” that can only be awarded if the plaintiff clearly demonstrates that it is entitled to such relief. The judge found that Polymarket did not provide sufficient proof that it would be seriously harmed by being prevented from offering event contract trading in Michigan while the case continues.
What even is a swap, anyway?
Maloney also concluded that sports event contracts are not “swaps” as covered by the CEA, despite Polymarket’s arguments to the contrary, and ruled that the CEA itself does not preempt state gambling laws.
“In the Court’s judgment, the statutory definition of ‘swap’ is ambiguous, and the context of the statute and the presumption against intruding into traditional areas of state authority lead to the conclusion that Plaintiff’s products are not included in it,” reads a portion of the decision.
“Context and purpose make clear that Congress intended the definition of swap to capture a set of products in the financial industry which caused the 2008 financial crisis and threatened to create other crises in the future, and not to place broad swaths of everyday economic activity under the authority of the Commodity Futures Trading Commission.”
Should states really be excluded from regulation?
Notably, Maloney also determined that even if Polymarket was found to be correct in its assertion that its event contracts meet the statutory definition of swaps, that would not necessarily preclude states from having a say in regulating the products.
“Even if Plaintiff were correct that its products fit the statutory definition of a certain regulated derivative, it is not clear that the statutory framework prevents states from regulating in the porous zone where derivatives and gambling meet … Even if Congress did go as far as Plaintiff says in defining what a ‘swap’ is, it is far from clear that it intended that to mean that states no longer have any role to play whenever something is a swap.”
Polymarket also dealt blow in Nevada
Like Kalshi and the CFTC itself, Polymarket is also involved in active litigation with other states, including:
- Massachusetts
- Minnesota
- Nevada
It sued Massachusetts Attorney General Andrea Joy Campbell and the Massachusetts Gaming Commission in February after a judge upheld a decision to grant Campbell a preliminary injunction against Kalshi. As in Michigan, Polymarket claimed that Massachusetts’s conduct against Kalshi posed a threat to its own business.
Meanwhile, over in Nevada, the Nevada Gaming Control Board (NGCB) was granted a preliminary injunction against Polymarket after the state gaming regulator took the fight to the company in court.
