Prediction Markets Weekly Roundup: Michigan Ruling, CME Lawsuit and New Launches Shape Busy Week

This week brought significant developments for prediction markets, as courts weighed in on sports-event contracts, regulators expanded enforcement efforts, and several companies moved forward with new launches and exchange applications. Meanwhile, CME escalated tensions within the derivatives industry by suing the CFTC over its approval of Kalshi’s perpetual futures contracts.

Legislative and Regulatory Developments

Michigan Court Denies Polymarket and Robinhood Injunction Requests

A federal judge in Michigan denied preliminary injunction requests filed by Polymarket and Robinhood. The court concluded that the companies had not demonstrated a likelihood of success on the merits.

In two nearly identical rulings, U.S. District Judge Paul Maloney determined that sports-event contracts are likely not swaps under the Commodity Exchange Act. He questioned whether Congress intended federal commodities regulation to preempt state gambling laws.

Industry Coalition Sues Kentucky; State AG Sues Kalshi, Polymarket

Kentucky Attorney General Russell Coleman filed lawsuits against Kalshi and Polymarket, along with sweepstakes operator VGW. The complaints allege the companies are conducting illegal gambling operations within the state.

The lawsuits arrived days after the newly formed Coalition for Fair Markets, representing Kalshi, Polymarket US, and Crypto.com’s derivatives exchange, filed a lawsuit challenging Kentucky’s recently enacted prediction market tax and related restrictions.

Earlier this year, Kentucky lawmakers approved a 14.25% tax on prediction market revenue. Separately, the state prohibited licensed sportsbooks from partnering with prediction market platforms beginning July 15.

Sixth Circuit Denies CFTC Oral Argument Request, Consolidates Appeals

The U.S. Court of Appeals for the Sixth Circuit denied a request from the CFTC to participate in oral arguments in Kalshi’s Ohio appeal. In April, the court denied Kalshi’s request for an injunction pending appeal in its challenge to Ohio’s sports betting enforcement.

Separately, the court consolidated the Ohio and Tennessee appeals. The move united two cases that produced conflicting lower court rulings on whether states can regulate sports-event contracts offered on federally regulated exchanges.

CFTC Amends Illinois Complaint, Targets New Prediction Market Tax

The CFTC amended the lawsuit against Illinois after Gov. JB Pritzker signed legislation creating a new tax structure for prediction markets.

The amended complaint specifically challenges Illinois’ new “exchange wager” provisions. The CFTC argues that the state is attempting to regulate markets that fall within the CFTC’s exclusive jurisdiction. The new law would impose transaction fees ranging from 1.75% to 3.5% on sports event contracts.

The CFTC also filed a motion for preliminary injunction seeking to block Illinois from enforcing its gambling laws against event contracts while the litigation proceeds. The agency argued Illinois is engaged in a “targeted campaign of regulatory hostility” toward prediction markets.

CME Sues CFTC Over Kalshi Perpetual Futures Approval

Chicago Mercantile Exchange (CME) filed suit against the CFTC in the U.S. District Court for the District of Columbia, challenging the agency’s approval of Kalshi’s Bitcoin perpetual futures contract.

CME argues perpetual contracts are swaps rather than futures. The company contends the CFTC unlawfully reversed its prior position without formal rulemaking. The lawsuit seeks to vacate the agency’s approval order and obtain a declaration that cryptocurrency perpetual contracts should be regulated as swaps.

The lawsuit represents a rare split between major derivatives market participants and the CFTC, which has recently sued multiple states for attempting to regulate event contracts, asserting federal authority over them.

New York Cites Michigan Decision; Tribal Groups Back State

New York regulators quickly moved after the Michigan ruling, filing Judge Maloney’s opinion as supplemental authority in the state’s ongoing litigation against Kalshi.

Meanwhile, a coalition of tribal gaming organizations and more than 30 federally recognized tribes submitted an amicus brief in support of New York’s position.

Groups including the Indian Gaming Association, the National Congress of American Indians, the Arizona Indian Gaming Association, the Washington Indian Gaming Association, and numerous tribal governments submitted the filing.

The tribes argue that prediction markets threaten the exclusivity of tribal gaming arrangements and could undermine long-standing federal and state gaming frameworks.

California Class Action Accuses Robinhood of Operating Illegal Sportsbook

A new proposed class action filed in California alleges Robinhood is operating an unlicensed sports gambling platform through its prediction market offerings.

The complaint argues Robinhood’s event contracts are effectively sports wagers rather than financial products. It seeks to recover losses allegedly incurred by customers.

The lawsuit also alleges Robinhood created a misleading impression that the products had state regulatory approval and targeted customers who may not otherwise participate in traditional gambling activities.

Launches and Expansions

ProphetX Launches Nationwide

ProphetX announced a nationwide launch, touting itself as “America’s first federally regulated sports-native prediction market.”

The former state-licensed sports betting operator (then known as Prophet Exchange), which later became a peer-to-peer sweepstakes exchange, received CFTC approval as a designated contract market (DCM) and a derivatives clearing organization (DCO) last week.

Novig Secures DCM Approval

Novig received CFTC approval to operate as a designated contract market.

The platform launched in 2021 as a betting exchange in New Jersey and Colorado. It briefly offered sports betting in Colorado before exiting the state. It later exited New Jersey as well.

In 2024, Novig pivoted to the sweepstakes model, positioning it more closely with sweepstakes sportsbooks. Now, the pivot to prediction markets is complete, and the company is likely to launch a platform soon.

Laila Mintas’ 365Prediction Files for DCM Status

365Prediction, founded by gaming executive Laila Mintas, filed an application with the CFTC seeking approval to operate a DCM.

The company disclosed plans for a fully collateralized exchange structure. It indicated it has licensed Eventus surveillance technology to monitor trading activity and detect potential market abuses.

Kalshi Expands Into Canada Through Wealthsimple Partnership

Kalshi announced a partnership with Wealthsimple that will bring prediction market products to Canadian users.

Due to Canadian regulatory restrictions, sports event and election contracts are excluded. The approval covers contracts with a 30-day settlement period or longer, within the categories of economic indicators, financial markets, and climate.

Polymarket and Splash Sports Launch $21m Survivor Contest

Polymarket and Splash Sports announced a strategic partnership centered on what the companies describe as “the world’s largest professional football survivor contest.”

The contest includes a guaranteed prize pool of $21 million. Participants make weekly picks, with the last person standing winning the top prize.

DAZN Launches World Cup Prediction Experience

Sports streaming giant DAZN and ADI PredictStreet, the official prediction market of the FIFA World Cup 2026, announced a free-to-play prediction market product tied to the tournament.

The offering allows DAZN users to make tournament predictions and compete through a gamified forecasting experience designed around the World Cup.

BC.Game Integrates Polymarket

Crypto online casino and sportsbook BC.Game announced the integration of Polymarket markets into its platform through a new Prediction Center.

The move expands Polymarket’s distribution footprint and provides BC.Game users with direct access to event-contract markets covering sports, politics, and current events.