Michigan Judge Rules Sports Contracts Likely Aren't Swaps — the First Real Crack in the CFTC Preemption Wall

US District Judge Paul L. Maloney of the Western District of Michigan denied Polymarket and Robinhood a preliminary injunction on June 19, 2026, ruling that sports event contracts are likely not swaps under the Commodity Exchange Act and therefore likely fall outside the CFTC's exclusive jurisdiction. The platforms had sought the injunction to block Michigan regulators — after Michigan Attorney General Dana Nessel sued Kalshi alleging illegal online sports betting — on the same federal-preemption theory that won in Arizona on May 5. Maloney rejected it. He wrote that the CFTC's broad authority claims "would sweep in activity that has traditionally belonged to state regulators rather than federal financial agencies," and reasoned that the lawmakers who drafted post-2008 financial-reform legislation did not intend to shift gambling-regulation power from states to a federal derivatives agency.

This is the first significant court loss for the prediction-market side in the 2026 wave, and it matters far beyond Michigan. Until now the story had one direction: the CFTC and the platforms won the Arizona preliminary injunction, and the agency cited that win as persuasive authority in every subsequent state case, framing its campaign as a clean sweep of black-letter preemption. Maloney's ruling ends the clean-sweep narrative. The district courts are now openly split — and the split runs inside a single appeals court. Michigan, Ohio, and Tennessee all sit in the Sixth Circuit, and the three have now gone three different ways: an Ohio judge sided with state regulators, a Tennessee judge backed the platforms, and Maloney has sided with the state. A federal appellate court cannot leave its own district courts contradicting each other on a question this consequential, which is why the Sixth Circuit is now expected to take the issue up directly.

The reasoning is what makes the ruling dangerous for the industry, not just the outcome. Maloney did not rule on a technicality; he engaged the core question — are these contracts swaps? — and answered no, at least at the likelihood-of-success stage. That is the exact opposite of Judge Liburdi's Arizona analysis, which found three independent grounds for preemption. Two federal judges looking at materially the same product reached opposite conclusions on the threshold legal question. That is the definition of an issue headed for higher review, and it strengthens the hand of every state attorney general — New Mexico's Raúl Torrez, Rhode Island's Peter Neronha, Minnesota's Keith Ellison — who has argued that the gambling characterization survives federal commodity law. It also gives the CFTC's still-pending proposed rule more weight, not less: the agency now has a concrete incentive to finalize a regulatory regime that makes the swaps characterization harder for a court to reject.

Two structural notes for readers tracking where this goes. First, an honest correction to our own prior coverage: we have repeatedly described the CFTC as winning these fights at the trial-court level and our litigation scoreboard showed zero state wins. Michigan changes that, and we have updated the scoreboard to reflect it. The accurate picture as of late June is a genuine split, not a federal sweep. Second, the tribal dimension is escalating in parallel: a coalition of more than 30 federally recognized tribes and the Indian Gaming Association filed an amicus brief supporting New York's position, arguing prediction markets threaten the exclusivity of tribal-state gaming compacts. That sovereignty interest — also live in the New Mexico case — adds a constituency that neither the platforms nor the CFTC can easily argue away, and it is the kind of argument appellate judges take seriously. The realistic path now runs through the Sixth Circuit and, almost certainly, eventually the Supreme Court.

Operators mentioned in this article

CFTC-regulated

Kalshi

First fully CFTC-regulated US event-contract exchange.

Crypto / On-chain

Polymarket

USDC-settled on Polygon. Largest prediction market by volume.

Broker (Embedded Contracts)

Robinhood

Consumer brokerage offering embedded event contracts. Fastest-growing retail prediction market platform in the US.

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