Coinbase faced a setback in its ongoing legal battle in Michigan regarding contracts for sports events, further complicating the situation for prediction markets in the state. A recent ruling from the U.S. District Court for the Eastern District of Michigan denied Coinbase a preliminary injunction that would have prevented state officials from enforcing laws against them for offering sports event contracts without the necessary gaming license.
The legal proceedings began when Coinbase filed a motion for a preliminary injunction and declaratory relief in December 2025, aiming to protect itself from civil or criminal actions by the Michigan officials and the Michigan Gaming Control Board (MGCB). This motion emerged as Coinbase operated contracts related to sports events with the support of the prediction market firm Kalshi.
Earlier in 2025, the MGCB had launched investigations targeting companies like Kalshi that were providing sports event contracts. This prompted Coinbase to take legal action, claiming that the MGCB's investigations interfered with its planned business activities in Michigan.
The denial of the preliminary injunction means Coinbase is now at risk of facing enforcement actions. District Court Judge Shalina Kumar ruled against Coinbase, stating that the company did not adequately demonstrate that Michigan’s regulation of sports event contracts was preempted by federal law, specifically the Commodity Exchange Act (CEA), which governs swaps.
Judge Kumar noted in her ruling that Coinbase’s arguments were fundamentally flawed. The court found that simply asserting that Congress aimed for uniformity in futures markets under the CEA wasn’t enough to justify a complete exemption from state gambling regulations.
Additionally, Kumar addressed Coinbase’s claims that complying with both federal and state laws—the CEA and Michigan's Lawful Sports Betting Act (LSBA)—was impossible. The judge clarified that mere difficulty or expense in compliance doesn’t equate to impossibility. The LSBA mandates that only licensed operators can offer online sports betting in Michigan, but Kumar argued that Coinbase did not show it was unfeasible to adhere to both sets of regulations.
The court also rejected Coinbase’s claims of irreparable harm, which included potential reputational damage and loss of opportunities. Kumar remarked that although these concerns are serious, the company had not met the requirements for issuing a preliminary injunction, so analyzing this factor was unnecessary.
Despite the ruling, Coinbase has the option to continue its legal fight, potentially seeking appellate review of the denied injunction. Alongside the challenge in Michigan, Coinbase is also in litigation against state officials in Illinois and Connecticut. Meanwhile, the New York Attorney General Letitia James has filed a separate lawsuit against Coinbase, accusing it of operating an illegal gambling enterprise in New York.
In Nevada, a judge has ordered Coinbase to prevent access to its sports event contracts following a preliminary injunction granted to the state's Gaming Control Board. This adds further complexity to Coinbase's legal landscape as it attempts to navigate the regulatory environment across multiple states.
In Michigan, the challenges extend beyond Coinbase. Kalshi recently faced a temporary restraining order (TRO) from Michigan Attorney General Dana Nessel, requiring it to use a third-party geolocation service to prevent access to its sports event contracts in the state. Failure to comply with the TRO could result in daily fines for Kalshi of up to $120,000.
Polymarket, another player in the prediction market sector, was similarly denied a preliminary injunction in Michigan after its claims were found unsubstantiated by a District Court judge, highlighting the ongoing difficulties faced by these companies under Michigan's regulatory framework.
The CFTC has intervened in this legal dispute, asserting that federal law does not permit the state to compel a designated contract market to violate its obligations. CFTC Chairman Michael Selig emphasized that states cannot force compliance with regulations that contradict federal law, and the CFTC will support prediction markets in fulfilling their legal obligations to customers.
Coinbase's efforts reflect broader tensions in the legal landscape concerning prediction markets and their compliance with varying state laws. The outcome of ongoing proceedings in Michigan and elsewhere could significantly impact the future operations of companies involved in sports event contracts.
SBC Americas has reached out to Coinbase for comments regarding the denial of its injunction and any potential next steps in Michigan.
