A federal judge in Michigan denied Coinbase’s request to block state gambling regulators from acting against its sports event contracts, ruling in an order issued August 6 that the exchange is unlikely to win its argument that federal commodities law overrides Michigan’s betting statutes. U.S. District Judge Shalina D. Kumar of the Eastern District of Michigan wrote that the contracts are probably not “swaps” under the Commodity Exchange Act, and that even if they were, the federal statute would not displace state gambling rules. Her order dismissed one Coinbase argument in a single word: “applesauce.”
A prediction market is an exchange where users buy and sell contracts that pay out based on whether a specific future event happens, such as which team wins a game. Coinbase offers these contracts to its customers through Kalshi, a derivatives venue registered with the Commodity Futures Trading Commission.
Key takeaways
- Judge Shalina D. Kumar denied Coinbase’s preliminary injunction against Michigan Attorney General Dana Nessel and state gaming officials on August 6, 2026.
- The court found sports event contracts are likely not swaps under the Commodity Exchange Act, and separately held the CEA does not preempt Michigan’s Lawful Sports Betting Act.
- Thirty-three federally recognized Indian tribes and the City of Detroit filed amicus briefs backing Michigan.
- Federal courts are now split, with Nevada, Ohio and the Western District of Michigan on one side and the Third Circuit, Arizona and Tennessee on the other.
Published: August 7, 2026, 16:15 UTC
What the court actually decided
Kumar rejected Coinbase’s preemption theory on two independent grounds, either of which would have been enough to deny the injunction.
On the first, she found Coinbase’s reading of the swap definition too broad to survive. The exchange argued that any contract tied to the occurrence of an event with a financial, economic or commercial consequence qualifies as a swap. Kumar wrote that this interpretation would render other parts of the statutory definition superfluous and would sweep in contracts on politics, music, climate and movies. Taken to its conclusion, she noted, it could turn ordinary sports betting placed outside a federal exchange into a felony, a result the order called absurd.
On the second, she held that the CEA does not preempt Michigan’s gambling laws even assuming the contracts are swaps. The statute’s exclusive jurisdiction language identifies which agency governs, not which body of law applies, and it sits alongside savings clauses. The CEA’s own special rule on event contracts expressly incorporates state law by letting the CFTC bar contracts involving activity that is unlawful under state law. And complying with Michigan’s rules, Kumar wrote, is not impossible simply because it is costly and challenging.
The order also dismissed the Michigan Gaming Control Board on sovereign immunity grounds, leaving Nessel and the board’s directors as defendants.
Why the opposition matters more than the ruling
Coinbase did not just lose to a state attorney general. Thirty-three federally recognized tribes and the City of Detroit filed briefs supporting Michigan, arguing that a Coinbase win would erode tribal gaming sovereignty and cut into the casino tax revenue Detroit’s budget depends on.
That coalition is the part of the ruling with the longest reach. Prediction markets are not colliding with a single regulator. They are colliding with tribal gaming compacts, municipal revenue streams and state licensing regimes backed by decades of legal infrastructure. Kumar found the balance of equities weighed heavily toward Michigan’s traditional police power over gambling.
Coinbase sued Michigan, Illinois and Connecticut in December 2025 to establish federal supremacy over its event contracts. Chief Legal Officer Paul Grewal argued at the time that prediction markets are neutral exchanges matching buyers and sellers, unlike sportsbooks that set odds to maximize house profit. The exchange has since faced enforcement in Nevada, Wisconsin and other states, often alongside Kalshi, Polymarket, Robinhood and Crypto.com.
The split that points to the Supreme Court
Kumar’s order catalogs a federal judiciary that cannot agree on the basic question. Courts in Nevada, Ohio and the Western District of Michigan have found sports event contracts are not swaps. The Third Circuit and courts in Arizona and Tennessee have found they are.
That conflict is the classic condition for Supreme Court review. Until it is resolved, an exchange’s legal exposure depends on which district its users sit in, the opposite of the uniform federal scheme Coinbase says Congress intended.
The CFTC has pushed the same argument through its own litigation, suing nine states over prediction market oversight with Kentucky the most recent in June. Courts are declining to read broad exclusive federal authority into a statute that does not say so plainly, the same problem that has stalled the CLARITY Act in the Senate.
What comes next
This is a preliminary ruling on likelihood of success, not a final judgment that the contracts are illegal. The underlying case continues and Coinbase can appeal the denial to the Sixth Circuit, which has already leaned Michigan’s way in a related Kalshi matter that Kumar’s order cites repeatedly.
For now, Coinbase’s route to offering sports event contracts in Michigan without state-law risk runs through an appeals court or through Congress. Neither is quick. The Senate does not return until September 14, and the market structure bill that might settle the jurisdictional question has no floor time scheduled.
Related coverage: Washington court blocks Kalshi sports event contracts and Polymarket seeks US license to offer margin trading.
Frequently asked questions
Does this ruling make Coinbase’s sports event contracts illegal?
No. The order denies a preliminary injunction, meaning Coinbase failed to show it is likely to win. The case continues, and the court has not issued a final judgment on legality. Michigan is now free to pursue enforcement while the litigation proceeds.
What is a swap under the Commodity Exchange Act?
A swap is a derivative contract where parties exchange payments based on the value of an underlying asset, rate or event. Coinbase argued sports event contracts fit that definition. Judge Kumar found the reading too broad, because it would classify almost any conditional payout as a federally regulated swap.
Can Coinbase appeal the decision?
Yes. Coinbase can take the denial to the Sixth Circuit Court of Appeals. That court has already ruled in a related Kalshi matter in a way that favors state authority, which Kumar’s order references throughout, so the near-term odds look difficult.
