A Michigan federal judge denied Polymarket's request for a preliminary injunction Wednesday, ruling that sports-related prediction market wagers do not constitute swaps under the Commodity Futures Trading Commission's jurisdiction. U.S. District Court Judge Paul L. Maloney of the Western District of Michigan sided with state regulators who seek to restrict the prediction market platform from offering sports-related wagers in Michigan, which the state classifies as illegal sports betting. The decision intensifies a nationwide legal conflict between the Trump administration's CFTC, which claims authority to regulate prediction markets under the Dodd-Frank Act of 2010, and state regulators asserting traditional authority over gambling activities.
Judge Maloney Rejects CFTC Authority Over Sports Prediction Markets
Judge Maloney stated explicitly in Wednesday's ruling that Polymarket's sports-related wagers are not swaps and should not be regulated by the CFTC. The judge denied Polymarket's preliminary injunction and indicated the company is not likely to succeed on the merits of the case. Maloney wrote that Polymarket's interpretation of derivatives scope "would encompass vast swaths of activity never understood to be associated with the financial industry and instead traditionally associated with core state, as opposed to federal, responsibilities." The judge continued that "Congress is not so cavalier with the fundamental federalist structure of the government" and expressed conviction that laws following the 2008 financial crisis "were not aimed at fundamentally redefining the balance between the federal and state governments in ways unrelated to the problems it set out to solve."
CFTC Claims Prediction Market Authority Under Dodd-Frank Act
Under President Donald Trump's second administration, the CFTC has claimed authority to regulate prediction markets under existing laws, specifically the Dodd-Frank Act of 2010. In recent months, the CFTC has sued several states attempting to curb the proliferation of prediction markets. Polymarket argues its sports-related wagers should be considered swaps under the federal purview of the CFTC, while Michigan regulators maintain such wagers constitute illegal sports betting under state law.
Sixth Circuit Split on Prediction Market Jurisdiction
Federal judges across the country have issued conflicting rulings on prediction market jurisdiction. Within the Sixth Circuit—which includes federal courts in Michigan, Ohio, Kentucky, and Tennessee—one Ohio federal judge sided with state regulators in March. Another federal judge in Tennessee sided with prediction markets in February. Two courts under the Sixth Circuit's purview have now sided with state regulators, and one with prediction markets and the CFTC.
Case Advances to Sixth Circuit Court of Appeals
The Sixth Circuit Court of Appeals is set to begin deliberating the matter next month. The case is likely to ultimately be decided in coming years by the U.S. Supreme Court.
FAQ
What did the Michigan federal judge rule on Wednesday regarding Polymarket?
U.S. District Court Judge Paul L. Maloney denied Polymarket's request for a preliminary injunction and ruled that sports-related prediction market wagers do not constitute swaps under the CFTC's jurisdiction. The judge sided with Michigan state regulators who seek to restrict Polymarket from offering sports-related wagers in the state.
Why does the CFTC claim authority over prediction markets?
Under President Donald Trump's second administration, the CFTC has claimed it was given authority to regulate prediction markets by existing laws, specifically the Dodd-Frank Act of 2010. The agency has sued several states attempting to restrict prediction market platforms.
What are the next steps in this legal case?
The Sixth Circuit Court of Appeals is set to begin deliberating the matter next month. The case is likely to ultimately be decided in coming years by the U.S. Supreme Court.
