Michigan AG Dana Nessel Sues Kalshi; Polymarket Hits Back in Prediction Market Lawsuit
Michigan Attorney General Dana Nessel filed a civil enforcement action in Ingham County’s 30th Judicial Circuit Court Tuesday, seeking a permanent injunction to stop Kalshi from offering sports event contracts to Michigan residents.
The filing makes Michigan only the second state to sue Kalshi without first issuing a cease-and-desist letter, and the third overall to pursue the company in state court.
Within 24 hours, the dispute expanded on two fronts.
Polymarket’s U.S. entity, QCX LLC, preemptively sued Nessel and the Michigan Gaming Control Board (MGCB) in federal court before the state could act.
The back-to-back filings are a telling sign of how volatile this legal landscape has become: states are moving faster, platforms are hitting back harder, and neither side shows any interest in a negotiated middle ground.
What Michigan Is Alleging vs. Kalshi
Nessel’s complaint frames Kalshi as an unlicensed sportsbook violating Michigan gaming law. It argues the platform markets to residents and processes payments through widely used financial systems without MGCB approval.
The filing cited a variety of live offerings to make the point concrete: AHL and Swedish Hockey League games, a DP World Tour golf head-to-head, a Detroit Pistons points total, and a college basketball spread between Rider University and Marist.
Michigan emphasized that the menu keeps growing, with player touchdown totals, winning margins, and parlay-style combinations all recently added.
“Kalshi keeps adding more,” the complaint stated, echoing Nevada’s earlier argument that the platform’s expansion signals deliberate disregard for state law, not regulatory ambiguity.
Polymarket Goes on Offense vs. Michigan
Rather than wait for Michigan to come to it, Polymarket moved first, a notably aggressive posture for a company that has generally positioned itself as a regulated financial exchange, not a combatant.
Its federal complaint argued that under the Commodity Exchange Act, Congress granted the CFTC sole authority over event contracts, leaving states no role to play. Polymarket does not set odds or bet against customers, it noted; it operates as a federally supervised market, and what Michigan calls gambling, federal law calls a financial instrument.
Nessel has rejected that framing entirely. Her position is straightforward: you cannot license your way out of Michigan’s gambling laws by calling a Pistons points market a derivative. That disagreement, blunt, fundamental, and unresolved, is now before two separate courts simultaneously.
States Are Winning on Their Own Turf
Michigan’s suit arrived less than 24 hours after a pivotal Nevada ruling. In that case, a federal judge sent enforcement cases against both Kalshi and Polymarket back to state court and found that federal commodities law does not automatically override a state’s right to enforce its own gambling statutes.
In practical terms: states have more legal room to act than prediction market platforms had argued.
Gaming attorney Daniel Wallach flagged the cascade risk immediately. Once one state forces Kalshi to geofence its residents out, the company’s standard argument that enforcement causes irreparable harm becomes significantly harder to sustain in every other jurisdiction. Nevada may be that first domino.
The state-by-state record is uneven but the momentum is clear. Massachusetts, New Jersey, Maryland, Nevada, Tennessee, Missouri, Illinois, Iowa, and tribal authorities in California and Wisconsin have all taken action or issued formal challenges.
Critically, suing in state court rather than waiting for Kalshi to remove cases to a more favorable federal forum has become a deliberate regulatory strategy, and it is working.
Regulators have won or preserved injunctive relief in every state-court case to date.
A $44 Billion Industry, and a Federal Regulator Playing Defense
The legal turbulence unfolds against explosive growth.
Prediction market trading volume reached an estimated $44 billion in 2025, with Kalshi alone posting more than $10 billion in volume following the Super Bowl.
DraftKings and FanDuel have launched competing prediction-style products, further blurring the line between licensed sportsbooks and fintech-style event markets, and raising the stakes for whoever wins this legal fight.
The CFTC under chair Michael Selig has been an active ally to the platforms, filing an amicus brief in the Ninth Circuit and warning publicly that it will not allow states to undermine federal jurisdiction.
But that backing has a structural problem: the CFTC can support platforms in federal court, file briefs, and issue statements, but it cannot stop a state judge from issuing an injunction. Every state-court victory for regulators is a reminder that federal support only goes so far.
What’s Next for Prediction Markets
The core question, whether federal commodities law trumps state gambling statutes, remains unresolved.
Conflicting rulings across multiple federal districts make the Supreme Court review a matter of when, not if.
The more immediate pressure point is Nevada, where a court-ordered exit could come within weeks. If Kalshi is forced to geofence its first state, the legal calculus shifts for every jurisdiction still in play.
Michigan is now one of those jurisdictions, with two simultaneous cases, a determined AG, and a state gaming board that has shown no inclination to back down.
The next 90 days may settle more of this dispute than the last 12 months combined, and the industry should be watching every court filing.
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