Michigan sues prediction market Kalshi, alleging illegal sports betting

Michigan attorney general sues company, alleging unlicensed sports betting
The company Kalshi, is a New York-based prediction market platform
The lawsuit says prediction markets function like illegal gambling platforms

Michigan Attorney General Dana Nessel is asking a judge to shut down a prediction market platform she says is illegally offering sports betting to residents.

Tuesday, Nessel filed the lawsuit in Ingham County Circuit Court against Kalshi, a company that allows people to trade contracts based on the likely outcome of events. Nessel alleges that Kalshi operates as an online sports betting platform without being properly licensed.

“Corporations cannot circumvent state gaming laws,” said Nessel in a press statement. “My office will hold those who sidestep Michigan’s consumer protections accountable and ensure that betting in our state remains lawful, fair and subject to the oversight our residents expect and deserve.”

The complaint alleges that Kalshi is operating as a sports betting platform, which violates the state’s Lawful Sports Betting Act, requiring such platforms to be licensed through the Michigan Gaming Control Board.

The state is seeking an order declaring that Kalshi is a sports betting app and a permanent injunction to stop the company from operating in the state.

“Kalshi operates a so-called prediction market through which residents of the State of Michigan can engage in unlicensed gambling under the guise of trading event contracts. This market is an online trading platform through which users may wager on the likelihood of a sports-related occurrence,” according to the lawsuit.

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The complaint states that under Michigan law, only state-licensed casinos and federally authorized tribal casinos are eligible to apply for a sports betting operator license. It argues that Kalshi, which is based in New York, does not fall into either category and therefore cannot legally offer online sports betting in Michigan.

Customers use prediction markets like Kalshi to wager on everything from whether it will rain in Los Angeles tomorrow to who will win the NBA championship to whether the nation will go to war. The contracts are typically priced between one cent and 99 cents, which roughly translates into what percentage of those customers believe that event will happen.

advertisement on a bus stop to bet on Trump versus Harris — A Kalshi ad invites bets on the 2024 presidential election. Michigan’s case is part of a broader national dispute over whether prediction markets should be regulated as gambling by states or as financial markets by federal regulators. (quiggyt4 / Shutterstock)

While customers can bet on anything, roughly 90% of Kalshi’s trading volume goes toward wagers on sports,

Michigan is now one of three states that have filed a lawsuit against Kalshi. A year ago, the Nevada Gaming Control Board issued a cease and desist order against the company. And in November, a judge ruled in favor of the Nevada Gaming Control Board, allowing it to enforce its state laws against Kalshi.

In September, the Massachusetts Attorney General also sued Kalshi, alleging that the company violated wagering laws and regulations.

The Trump administration has stepped in, voicing its support for the company amid the ongoing legal battles.

The Commodity Futures Trading Commission regulates prediction markets and federal oversight allows Kalshi and similar companies to operate in states even where gambling is illegal.

Michael Selig, who was recently appointed as chair of the CFTC by President Trump wrote in an op-ed in The Wall Street Journal, “The CFTC will no longer sit idly by while overzealous state governments undermine the agency’s exclusive jurisdiction over these markets by seeking to establish statewide prohibitions on these exciting products.”

The piece highlights a shift from the position Selig expressed during his confirmation hearing in November.

“Prediction markets aren’t new and the definition of commodity is extraordinary broad,” Selig said during a CNBC Digital Finance Forum. “We’ve got a lot of authority over these markets.”