Polymarket is taking Michigan to court, saying state officials are trying to police a business that answers to Washington, not Lansing.
QCX LLC, operating as Polymarket, filed a lawsuit Wednesday (March 4) in the U.S. District Court for the Western District of Michigan. The company wants a federal judge to stop the state from applying its gambling laws to Polymarket’s event-based trading platform.
Polymarket runs a designated contract market under the supervision of the Commodity Futures Trading Commission, or CFTC. On its platform, users trade event contracts, which are financial products tied to the outcomes of real-world events. In its complaint, the company says Congress granted the CFTC “exclusive jurisdiction” over these kinds of derivatives, arguing that states have no authority to regulate or prohibit them.
The legal fight erupted just one day after Michigan Attorney General Dana Nessel sued Kalshi, another CFTC-regulated exchange, in state court. In that lawsuit, Nessel claims that offering sports-related event contracts to Michigan residents amounts to unlicensed sports betting under state law. The complaint mirrors concerns raised by the Michigan Gaming Control Board, which recently confirmed it is investigating sports prediction markets and has warned that only licensed sportsbooks may offer sports wagering in the state.
Polymarket says those moves leave it squarely at risk.
“The threat to Polymarket US is immediate and concrete,” the company wrote in its complaint seen by ReadWrite, pointing to Michigan’s March 3 lawsuit against Kalshi. It says it faces a “real and imminent risk of enforcement,” including potential civil fines, criminal liability, and an order that could force it to stop operating in Michigan.
Polymarket argues federal law trumps Michigan state gambling rules
Polymarket argues that Congress resolved that boundary years ago by amending the Commodity Exchange Act to give the CFTC sweeping control over derivatives traded on federally designated markets. The company says that power extends to swaps and event contracts like those it lists.
The federal statute grants the CFTC “exclusive jurisdiction” over transactions involving swaps or futures contracts on designated markets. According to Polymarket, its event contracts fall neatly within that framework. The complaint also stresses that federal law leaves it to the CFTC, not individual states, to determine whether certain event contracts resemble gaming and whether they should be restricted on public interest grounds.
State regulators see it differently. In announcing the Kalshi lawsuit, Nessel said companies cannot sidestep Michigan’s licensing system by rebranding sports betting as financial trading. The Gaming Control Board has likewise signaled that offering sports-based prediction contracts without state approval could violate Michigan law.
Polymarket draws a firm line between its exchange and a traditional sportsbook. It says it does not set odds or wager against customers. Instead, it matches buyers and sellers and collects a flat transaction fee, without any stake in the outcome of the events being traded.
Even the possibility of state enforcement, the company argues, could be damaging. A lawsuit might trigger termination clauses in commercial agreements, shake business relationships, and erode customer confidence. Blocking Michigan users, it adds, would thin liquidity across its national market and interfere with existing contracts.
Polymarket is asking the federal court to declare that Michigan’s gambling laws are preempted by federal law as applied to its platform. It is also seeking preliminary and permanent injunctions to prevent state officials from taking enforcement action while the case moves forward.
ReadWrite has reached out to the Michigan Attorney General’s Office for comment.
Featured image: Polymarket / Canva
