Michigan Sues Kalshi in State Court, Sparking Federal Counter-Lawsuits from Polymarket and Robinhood Over Prediction Market Jurisdiction

Michigan sues Kalshi in state court while Polymarket and Robinhood counter-sue in federal court. Read about the fight over CFTC vs. State gambling jurisdiction.

By: AXL Media

Published: Mar 5, 2026, 10:53 AM EST

Source: The information in this article was sourced from Gambling Insider

Michigan’s Strategic State-Court Offensive

On March 3, 2026, Michigan Attorney General Dana Nessel initiated a civil enforcement action against Kalshi in Ingham County Circuit Court, seeking a permanent injunction to stop the platform from offering sports-related event contracts to Michigan residents. The complaint argues that these contracts—such as a market on the combined score of a Detroit Pistons game—are unlicensed sports wagers that violate state gaming laws. By filing in state court, Michigan is following a successful strategy used in Massachusetts and Nevada, designed to avoid early federal rulings on preemption and keep the dispute within a jurisdiction less favorable to Kalshi’s arguments.

Federal Retaliation from Polymarket and Robinhood

Within 24 hours of Michigan’s filing, Polymarket and Robinhood launched preemptive federal lawsuits in the U.S. District Court for the Western District of Michigan. Both companies are seeking declaratory and injunctive relief to prevent Michigan from applying state gambling laws to their platforms. Polymarket’s complaint emphasizes that it acts as a middleman—similar to a stock exchange—charging flat transaction fees rather than setting odds or acting as "the house." Robinhood, which offers prediction markets through a partnership with Kalshi, also argues that state intervention threatens the liquidity and commercial stability of federally regulated derivatives exchanges.

The Preemption Battle: State vs. Federal Jurisdiction

At the heart of the conflict is the Commodity Exchange Act (CEA). Kalshi, Polymarket, and Robinhood contend that the CEA grants the Commodity Futures Trading Commission (CFTC) exclusive authority over "event contracts" listed on designated contract markets. They argue that state regulators are overstepping their bounds by reclassifying these financial instruments as "gambling." Michigan, however, asserts that Congress never intended to strip states of their traditional power to regulate betting, particularly when the contracts mirror traditional sports wagering products.