Michigan Warns Sportsbooks Over Prediction Market Bets

State regulators are stepping up oversight of prediction markets, warning that sportsbooks could jeopardize their licenses by offering contracts tied to sports events. Michigan became the latest to issue such a warning, joining a wave of similar actions from other jurisdictions.

Last week, the Michigan Gaming Control Board (MGCB) sent a memo to licensed sportsbook operators cautioning that “any involvement in the offering of sporting event contracts, directly or via an affiliate, key person, related business entity, or other association, will have implications relative to your licensure in Michigan.” The memo was first reported by The Closing Line newsletter. The MGCB’s move comes amid a broader regulatory backlash against event-based markets that blur the line between prediction markets and sports wagering. In April, the agency opened an investigation into sports prediction markets to assess potential violations of state gaming laws.

 

Topic	Details
State	Michigan (also Ohio, Arizona, Massachusetts, others)
Regulator	Michigan Gaming Control Board
Warning	Sportsbooks risk license if offering sports event prediction markets
Industry Moves	FanDuel, Underdog, DraftKings exploring prediction market products
Legal Action	Lawsuits in Massachusetts, California, Maryland, Nevada, New Jersey
Federal Oversight	CFTC regulates event contracts; limited coordination with SEC

 

National Scrutiny Increases

Michigan is not alone. Regulators in Ohio, Arizona, Illinois, Montana, and other states have issued similar warnings or cease-and-desist letters to firms offering or partnering with prediction market platforms. The Ohio Casino Control Commission earlier this year ordered event trading platform Kalshi to halt operations, while the Arizona Department of Gaming issued a comparable notice. The crackdown comes despite the U.S. Commodity Futures Trading Commission (CFTC) allowing certain event contracts under federal commodities law — a stance that has led to overlapping regulatory disputes.

Multiple lawsuits are underway to determine whether platforms like Kalshi are effectively offering unlicensed sports betting. Massachusetts Attorney General Andrea Campbell sued Kalshi last month, arguing that “sports wagering comes with significant risk of addiction and financial loss and must be strictly regulated.” She said companies offering such products in Massachusetts must “obtain a licence and follow our laws.” Similar legal actions have been filed in California, Maryland, Nevada, and New Jersey. Despite the regulatory friction, several major operators are moving into prediction markets. FanDuel announced a joint venture with CME Group to develop an events-based trading platform, while Underdog partnered with Crypto.com to offer similar products. DraftKings CEO Jason Robins has also publicly expressed interest in expanding into prediction markets.

Event trading platforms continue to test regulatory boundaries. Kalshi launched sports event contracts in January and recently added parlay-style offerings. Robinhood began offering Kalshi’s football markets at the start of the NFL season, signaling a growing appetite among mainstream fintech and gaming companies.

 

Any involvement in the offering of sporting event contracts…will have implications relative to your licensure in Michigan.

 

Federal Agencies Eye Coordination

At a recent joint roundtable between the CFTC and the U.S. Securities and Exchange Commission (SEC), participants discussed potential collaboration on oversight. Prediction markets, however, received limited discussion, even as outgoing CFTC Commissioner Caroline Pham warned of “weak oversight” in the sector. For now, state regulators appear determined to assert control. The MGCB said its mandate includes “evaluating a person’s suitability for licensure both when an application is made and on a continuing basis,” adding that operators must notify the agency if they plan to offer sports event contracts.

As federal and state agencies jockey for jurisdiction, prediction markets sit in a legal gray area — promoted by technology firms as innovative financial instruments, but viewed by many regulators as unlicensed sports betting under a different name.