Coinbase suffered a loss in its legal dispute in Michigan over sports event contracts, adding to recent unfavorable rulings for prediction markets in the state.
According to documents filed this week in the U.S. District Court for the Eastern District of Michigan, Southern Division, Coinbase has been denied a preliminary injunction in the Wolverine State, subjecting the company to potential enforcement action by state officials and agencies for offering sports event contracts without a gaming license.
Coinbase takes Michigan to court
Coinbase filed a motion for preliminary injunction and declaratory relief in December 2025 to prevent Michigan officials and the Michigan Gaming Control Board (MGCB) from pursuing civil or criminal enforcement actions for delivering sports event contracts.
The fintech company filed its motion as it hosts event contracts powered by Kalshi.
Earlier in 2025, the MGCB initiated investigations into prediction markets offering sports event contracts in the state, including Kalshi, leading Coinbase to file suit in Michigan alleging that the MGCB’s probes comprise the company’s planned business activities in the state.
The fintech company is now potentially subject to civil or criminal enforcement, with District Court Judge Shalina Kumar denying the preliminary injunction despite Coinbase arguing that its event contracts should be regulated by the Commodity Futures Trading Commission (CFTC) under the purview of the Commodity Exchange Act (CEA).
Why was Coinbase motion denied?
Kumar denied Coinbase’s motion for a preliminary injunction because the company failed to sufficiently make a claim that it would likely succeed on the merits of its argument that Michigan is preempted from regulating sports event contracts because they are considered “swaps” under the CEA.
“Coinbase’s averments are, in a word, applesauce,” says Kumar in her ruling.
“For one, Coinbase’s contention that Congress endeavored to bring uniformity to futures markets through the CEA is not, as discussed in the previous section, enough to demonstrate that Congress therefore intended to completely preempt state gambling laws from tangentially regulating purported swaps.”
Kumar also points to Coinbase’s argument that it would be “impossible” to comply with the CEA and the state’s Lawful Sports Betting Act (LSBA) at the same time. The LSBA requires online sports betting to only be offered by an operator licensed by the MGCB.
“For another thing, it is not impossible for Coinbase to comply with the LSBA simply because it is costly and challenging,” continues Kumar. “Even if Coinbase is correct that the LSBA and CEA use different methods of enforcement—and it is not clear that is the case—enforcement of the LSBA still does not stand as an obstacle to the objectives of the CEA.”
In the court documents, Kumar also rules Coinbase failed to show that it would suffer “irreparable harm” if the company is unable to offer sports event contracts in Michigan.
“Coinbase contends that it will face several potentially irreparable injuries if Michigan is not preliminarily enjoined,” adds Kumar. “This includes reputational harm, lost opportunity costs, and adverse state action against its constitutional rights. Although these alleged harms are serious, because Coinbase fails to succeed on the other three preliminary injunction factors, it is unnecessary to analyze this factor.”
The company can continue its legal fight to keep its sports event contracts alive in Michigan by continuing to litigate the issue by seeking appellate review of Kumar’s denied injunction.
Other legal proceedings for Coinbase
In addition to Michigan, Coinbase is also suing state officials in Illinois and Connecticut.
Meanwhile, the company is facing a lawsuit brought by New York Attorney General Letitia James. She alleges that Coinbase runs an illegal gambling operation in New York.
In Nevada, Coinbase was ordered to block access to its sports event contracts in the state after a judge granted the Nevada Gaming Control Board a preliminary injunction and declaratory relief to prevent Coinbase from offering sports event contracts in the state.
In the suit, Coinbase also argued the CFTC’s authority over prediction markets.
Kalshi, Polymarket receive bad news in Michigan
Coinbase faces an uphill battle to continue offering sports event contracts in Michigan after a Circuit Court judge granted a temporary restraining order (TRO) sought by Michigan Attorney General Dana Nessel against Kalshi. The TRO requires Kalshi to leverage a third-party geolocation service to block access to sports event contracts in Michigan.
Kalshi faces fines of up to $120,000 per day if it fails to comply with the TRO.
Polymarket was also denied a preliminary injunction against state officials in Michigan.
The prediction market sued state officials in March alleging it was in “imminent and concrete danger” of facing enforcement action in the state. A District Court judge determined that Polymarket failed to prove it would suffer immediate irreparable harm by pulling sports event contracts in Michigan.
CFTC backs Kalshi in legal dispute in Michigan
Michigan is suing Kalshi without formally sending the prediction market a cease-and-desist order. In its initial suit against Kalshi, Michigan sought a permanent injunction.
The CFTC responded to the recent TRO granted against Kalshi by telling the prediction market to continue providing sports event contracts in the state despite the order.
Last month, the agency announced that it would exercise its “emergency authority” to allow Kalshi to fulfill open trades that were placed by customers in Michigan.
“A state cannot force a DCM [designated contract market] to violate its obligations, and federal law does not permit a DCM to discriminate against a state’s residents,” said CFTC Chairman Michael Selig when announcing plans to exercise emergency authority.
Selig also said that the CFTC will not allow state officials or courts to “bully” prediction markets that are registered with the agency to prevent violations of the CEA.
Recent legal proceedings in US prediction market space
The update of Coinbase’s suit in Michigan adds to recent movement in prediction markets:
- Last week, James sued Kalshi on behalf of New York for running an “illegal, unlicensed gambling operation” and is seeking $36bn for the alleged illicit activity.
- In a U.S. Court of Appeals, Kalshi representatives delivered oral arguments on July 27 after split decisions in federal courts over sports event contracts in Ohio and Tennessee.
- On Tuesday, Kalshi was denied an injunction in Utah to prevent state officials from enforcing state gambling laws against prediction markets.
- That same day, Ohio’s Solicitor General and several tribal gaming leaders asked Congress to take action against sports event contracts during a Senate Committee on Indian Affairs roundtable.
- The CFTC was also recently denied a preliminary injunction in Wisconsin to block the state’s efforts to prohibit sports event contracts.
Coinbase’s legal proceedings in Michigan are expected to continue as it seeks to keep its sports event contracts alive. SBC Americas reached out to the fintech company for comment on its denied injunction and for insights into its next legal steps in Michigan.
