Michigan joins states warning sportsbooks against prediction markets

More state regulators are intensifying scrutiny of prediction markets, with the Michigan Gaming Control Board warning sportsbook operators their licenses could be at risk if they offer sports event contracts.

An increasing number of state regulators are warning sportsbook operators about offering sports event prediction markets.

The Michigan Gaming Control Board issued a memo to sports betting operators last week warning them licences could be in jeopardy if they expand into prediction markets. The Closing Line first reported the news. Other state regulators have issued similar letters, including the Ohio Casino Control Commission and the Arizona Department of Gaming.

In April, the MGCB opened an investigation into sports prediction markets.

The objection from state level regulators comes despite event trading platforms being regulated by the US Commodity Futures Trading Commission. Multiple state and federal lawsuits are in progress over the issue of whether prediction markets illegally constitute sports betting.

The letter comes after several sportsbook operators announced intentions to offer prediction markets. FanDuel entered a joint venture with CME Group for an events-based markets product, while Underdog announced it would begin offering products through a deal with Crypto.com. DraftKings CEO Jason Robins has also discussed prediction markets.

“The MGCB writes to make you aware 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 regulator’s memo to operators reads.

State regulators wary of prediction markets

The MGCB said it is tasked with “developing licensing qualifications, standards and procedures and evaluating a person’s suitability for licensure both when an application is made and on a continuing basis”. It also said each licensee must notify the agency if it looks to offer sports event contracts.

Last month, Massachusetts Attorney General Andrea Campbell sued Kalshi over the issue of sports betting through prediction markets. That followed similar lawsuits from California, Maryland, Nevada and New Jersey.

“Sports wagering comes with significant risk of addiction and financial loss and must be strictly regulated to mitigate public health consequences,” Campbell said in a release. “This lawsuit will ensure that if Kalshi wants to be in the sports gaming business in Massachusetts, they must obtain a licence and follow our laws. I am grateful for the ongoing partnership with the Gaming Commission.” 

Prior to sending its warning letter to sportsbooks, Ohio’s commission issued a cease-and-desist letter to Kalshi earlier this year. Other states to issue cease-and-desist letters include Arizona, Illinois and Montana.

Prediction markets continue push into sports betting

Event trading platform Kalshi began offering sports event contracts in January and continues to expand its offerings. It recently pushed into parlay offerings.

Robinhood began offering Kalshi’s football markets at the beginning of the season.

Last month at a roundtable held by the CFTC and US Securities and Exchange Commission, representatives discussed ways to collaborate. Prediction markets received little attention, despite an outgoing CFTC commissioner’s recent warning about the segment’s weak oversight.