Judge: Sports prediction markets not CFTC swaps

U.S. District Judge Paul L. Maloney in the Western District of Michigan ruled that sports-related prediction market wagers on Polymarket are not swaps under the Commodity Futures Trading Commission’s authority and denied Polymarket’s request for a preliminary injunction that would have blocked Michigan regulators from restricting the platform’s sports contracts.

Polymarket runs a platform where users buy and sell contracts tied to event outcomes, including sports. Michigan regulators moved to bar the company from offering sports markets in the state, arguing those contracts amount to illegal sports betting. Polymarket argued the contracts qualify as federal “swaps” under the Dodd-Frank Act and therefore fall under CFTC jurisdiction.

Maloney found Polymarket is unlikely to succeed on the merits and rejected the characterization of the markets as swaps. In his written ruling Maloney wrote: “Plaintiff’s vision of the scope of derivatives is so vast that it 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.” He added: “Congress is not so cavalier with the fundamental federalist structure of the government” and said the post-2008 laws 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.”

The decision prevents Polymarket from enjoining Michigan’s regulatory action while litigation continues. The case will proceed to the Sixth Circuit Court of Appeals, which will consider competing interpretations of federal swaps law and state authority. The appeals process could lead to further review by the U.S. Supreme Court.

The CFTC, backed by the Trump administration, has in recent months asserted broad authority to regulate prediction markets under the Dodd-Frank framework and has brought or threatened suits in several states that have moved to limit those markets. Federal judges in the Sixth Circuit have reached differing outcomes: an Ohio judge sided with state regulators in March, while a Tennessee judge ruled for prediction-market operators in February.

For now, Michigan regulators may continue to restrict Polymarket’s sports contracts in the state while the case moves through the courts.