Kalshi and Polymarket faced new legal battles as states advanced taxes, Congress proposed new restrictions, and traditional finance moved further into prediction-style markets.
This week marked another busy period for the prediction market sector, led by Kalshi facing new setbacks in Michigan and Nevada while Polymarket sued New Mexico. Meanwhile, North Carolina moved closer to becoming the second state to tax prediction markets, and federal lawmakers introduced another bill targeting political event contracts.
Litigation Continues Across Multiple States
Michigan Judge Orders Kalshi to Stop Offering Sports Markets
In perhaps the most significant development this week, a Michigan judge approved a temporary restraining order against Kalshi, requiring the prediction exchange to halt offering contracts on sporting events in the state.
The order came in Attorney General Dana Nessel’s lawsuit against Kalshi. Judge Rosemarie Aquilina warned the company could face daily fines if it failed to comply with geolocation requirements.
The decision made Michigan the third state to get an injunction against Kalshi after Nevada and Massachusetts.
Polymarket Sues New Mexico Over Enforcement Threat
Polymarket also entered the New Mexico litigation fight, suing Attorney General Raúl Torrez and state gaming officials in federal court.
The complaint argues New Mexico’s lawsuit against Kalshi and the state’s refusal to delay enforcement created an immediate threat of enforcement against Polymarket.
Nevada Supreme Court Denies Kalshi Emergency Stay
Kalshi also suffered another defeat in Nevada. The state’s Supreme Court denied the company’s emergency motion for a stay pending appeal.
A hearing is now scheduled for July 16 to hear arguments on why Kalshi didn’t geofence the state following Nevada’s preliminary injunction and determine whether the company should be held in contempt for allegedly violating the order.
Kalshi Sues Ohio in State Court
Kalshi opened another front in Ohio, suing the Ohio Casino Control Commission in state court to block administrative proceedings seeking a $5 million civil penalty.
The commission has accused Kalshi of offering unlicensed sports betting in the state, while Kalshi argues the proceedings improperly target federally regulated event contracts.
The lawsuit marks the latest chapter in Kalshi’s dispute with Ohio, which began after regulators issued a cease-and-desist letter in 2025. Kalshi previously failed to secure a preliminary injunction, and the Sixth Circuit later denied Kalshi’s emergency request for an injunction pending appeal.
New Jersey Takes First Step Toward SCOTUS Review
The sports prediction market fight also moved closer to the U.S. Supreme Court.
Justice Samuel Alito gave New Jersey until Aug. 4 to file a petition challenging Kalshi’s Third Circuit win against the state.
The filing could become the first opportunity for the U.S. Supreme Court to weigh in on whether the Commodity Exchange Act preempts state gambling laws governing sports-event contracts.
Massachusetts Amends Kalshi Suit
Massachusetts also escalated its case against Kalshi after a judge allowed the attorney general to file an amended complaint to the ongoing lawsuit in state court.
The expanded lawsuit adds claims tied to Kalshi’s marketing and its availability to users under 21, while continuing to allege the platform is offering illegal sports wagering.
Minnesota Hearing Over Prediction Market Ban
Kalshi and Polymarket appeared in federal court seeking to block Minnesota’s first-in-the-nation law banning prediction market platforms before it takes effect Aug. 1.
Minnesota argued it was exercising its historic “police powers” to protect public safety, health, and welfare. State representatives claimed that the law aligns with state statutes prohibiting sports betting or other forms of unlicensed gambling.
U.S. District Judge Katherine Menendez questioned whether sports-event contracts are meaningfully different from traditional sports betting. She said that it was “an uphill battle” to convince her that markets, such as an individual player’s rebound total, have economic or commercial consequences.
She also suggested that simply changing a sportsbook wager to a prediction contract may not fundamentally alter the product.
The judge took the preliminary injunction request under advisement.
Illinois TRO Hearing Canceled After Reassignment Agreement
In Illinois, a temporary restraining order hearing in Kalshi’s case was canceled after the parties agreed to have the case reassigned to the same judge who is also hearing CFTC and Coinbase cases involving similar issues.
Illinois also agreed not to take enforcement action while Kalshi’s preliminary injunction motion is pending.
Lawmakers Continue Expanding Oversight
Federal Lawmakers Target Political Prediction Markets
Reps. Kristen McDonald Rivet, Kevin Kiley, Greg Landsman, and Eugene Vindman introduced a new bipartisan federal bill that would ban public officials from trading stocks and using prediction markets to wager on government and political outcomes.
The No Profiting from Public Service Act would apply to politicians, Supreme Court justices, and other federal officials.
The proposal adds to a growing list of federal prediction market bills focused on insider trading, conflicts of interest, and political-event contracts.
North Carolina, New Jersey Advance Prediction Market Tax
Lawmakers in North Carolina and New Jersey advanced proposals to tax prediction markets.
North Carolina lawmakers approved a conference committee budget report in both the House and Senate on July 2, which includes a 6% tax on prediction markets. The measure now awaits formal enrollment before being presented to Gov. Josh Stein.
Meanwhile, in New Jersey, committees in both chambers advanced companion bills that would impose a 9% surtax on prediction market revenue.
The bills were substantially amended, with the Senate Budget and Appropriations Committee and Assembly Budget Committee removing provisions to create a regulatory framework and prohibit certain contracts.
Traditional Finance Continues Embracing Prediction Markets
Cboe Pushes Prediction-Style Options
Traditional exchanges continue moving deeper into prediction-style products.
Cboe Global Markets is seeking approval from the U.S.Securities and Exchange Commission (SEC) to introduce a new class of binary options linked to corporate performance metrics.
If approved, the products could give investors yes-or-no exposure to corporate KPIs through securities accounts. The results will be based on the metric, rather than the company’s stock price.
Although distinct from CFTC-regulated prediction markets, the proposal underscores growing interest among traditional exchanges in event-based financial products.
Industry Pushback and Market Integrity
Market Integrity Questions Grow After Spotify Incident
Spotify removed more than 500,000 fake streams from Malcolm Todd’s “Earrings” after suspicious trading activity on Kalshi drove the song to the top chart spot on Spotify’s U.S. streaming chart.
The incident followed complaints from a Kalshi trader who claimed that bot activity had distorted the market.
The incident highlights recurring concerns around whether prediction market platforms can adequately detect attempted manipulation.
Prediction Markets Coalition Pushes Back Against States, AGA
The Coalition for Prediction Markets, which represents several operators, including Kalshi, has accused the American Gaming Association and state regulators of coordinated opposition to federally regulated event contracts.
The coalition has argued that states are trying to protect gambling monopolies and tax revenue by treating CFTC-regulated event contracts as illegal sports betting.
The accusation followed reports that a Maryland Lottery and Gaming Control Agency letter submitted to the CFTC criticizing prediction markets used language from templates prepared by the American Gaming Association.
Kalshi Launches “Kalshi Truth”
Kalshi also launched Kalshi Truth, a messaging effort aimed at countering criticism of its business model.
According to the website, the initiative is designed to address what the company views as misinformation about prediction markets. It debunks 11 claims, including that sports-event contracts are simply unlicensed sports betting.
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