Prediction markets push gambling to new level, causing concern
Michigan had a banner year for online sports betting in 2025, when a dozen operators netted $436 million in profits and paid nearly $36 million in taxes.
Now it is waging a legal fight to preserve oversight and tax revenue amid competition from a surging threat: prediction markets. The increasingly popular platforms, which are regulated by the federal government, allow people to trade on the outcome of real-world events, including sports.
In March, Attorney General Dana Nessel sued Kalshi, a fast-growing prediction market, in Ingham County, contending it is an illegal sports-betting operation without a state license. The New York-based company pays ordinary business taxes but not gambling taxes.
A day later, New York-based Polymarket and California-based Robinhood, a Kalshi partner, filed suit in federal court to bar the state from regulating event contracts. Crypto company Coinbase, which also partners with Kalshi, preemptively initiated federal litigation against Michigan in December.
Given similar court challenges in at least a dozen states, the battle appears destined to eventually reach the U.S. Supreme Court, whose 2018 decision striking down a federal sports-betting ban sparked a wave of legalization across the country.
The duel is “really an existential threat to the gaming industry, the legal gaming industry,” said Roger Gros, editor-at-large of Global Gaming Business, a trade publication. “When you can offer sports betting in all 50 states, when teenagers can bet on the game, when your (ID verification) and your responsible gaming programs are basically absent, it’s really a difficult situation. The industry is under a big threat and we’ve got to kind of fight it off and I’m glad Michigan is involved.”
The state’s age limit to place online sports wagers is 21. Kalshi, which controls almost 90% of measured U.S. prediction market volume, allows those 18 and older to trade.
The American Gaming Association, an industry group, estimates that states have lost $1 billion in tax dollars since event-trading platforms expanded into sports. It says framing sports wagering like investing is misleading, the exchanges have less oversight and their ads lack safe-gambling reminders.
Kalshi last month helped launch a new advocacy organization to shape federal policy and take on sportsbook and casino interests it said “are focused on protecting their monopolies and seeding lies about prediction markets to policymakers.”
“Millions of Americans have shown they want regulated, open, and fair prediction markets — and we’re going to make sure they have access to them,” said John Bivona, Kalshi’s head of government relations.
Major players in the sports-betting industry such as FanFuel and DraftKings, which operate in Michigan, have launched their own sports-prediction markets. Kalshi and Polymarket also offer trading on things like politics, wars, finance and the weather.
Nevada last year effectively forced FanDuel and DraftKings to choose. They went with prediction markets, though their sportsbook footprints had been limited or nonexistent there unlike in Michigan.
Gros said other states should follow suit: “I think FanDuel and DraftKings should have their licenses removed in all the legal states for being involved in illegal gambling in other states. But I know it’s another legal challenge that they might not want to take on.”
Michigan Gaming Control Board executive director Henry Williams in October did warn licensees “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.”
It appears the state for now is concentrating its legal efforts directly on Kalshi and others.
“We continue to monitor our licensees for compliance with these requirements and will take appropriate regulatory action to address any compliance issues,” MGCB spokesperson Lisa Keith said of the memo.
https://www.crainsdetroit.com/forum/cdb-forum-sports-betting-sidebar-20260622/