A federal judge in Michigan denied Coinbase's bid to block the state from enforcing its sports betting law against the exchange's event contracts. Judge Shalina Kumar ruled Coinbase had not shown federal law preempts Michigan's authority, leaving the exchange's wider fight over prediction markets unresolved in several states.
Judge rejects Coinbase's preemption argument
U.S. District Judge Shalina Kumar of the Eastern District of Michigan denied Coinbase's request for a preliminary injunction on Thursday, ruling the exchange had not shown it is likely to succeed on its claim that federal law preempts Michigan's jurisdiction over sports event contracts.
The crypto exchange sued Michigan in December 2025, arguing prediction markets fall under the exclusive jurisdiction of the Commodity Futures Trading Commission under the federal Commodity Exchange Act rather than state gaming regulators. Coinbase wants to give customers, including those in Michigan, access to event contracts supplied by Kalshi.
Kumar rejected Coinbase's argument that sports event contracts qualify as swaps under the Commodity Exchange Act. She also rejected its claim that complying with both federal law and Michigan's Lawful Sports Betting Act would be impossible, and Judge Kumar wrote that "Coinbase's averments are, in a word, applesauce." She added that operating at higher cost or with more difficulty does not make compliance impossible, and concluded Coinbase had not carried the burden required for a preliminary injunction.
A fight playing out across states
The Michigan case sits inside a broader dispute over prediction markets. In December, Coinbase also sued Illinois and Connecticut over similar restrictions. The CFTC has pursued the opposite position, suing nine states over the past year — including Kentucky, Wisconsin, Illinois, Arizona, Connecticut, New York, New Mexico, Minnesota and Rhode Island — to assert federal oversight of the industry.
Federal courts remain divided on the underlying legal question. In April, the Third Circuit affirmed preliminary relief for Kalshi in New Jersey, finding Kalshi had shown a reasonable chance of proving sports event contracts are swaps that preempt conflicting state rules. Michigan federal judges, by contrast, have questioned whether Congress meant the Commodity Exchange Act to cover sports wagering, and courts in Ohio have limited the same preemption theory.
What happens next
The CFTC is also rewriting its event contract rules: a June proposal would set a review process for whether contracts touch gaming, terrorism or other unlawful conduct, with a 90-day review period. Coinbase can keep litigating its Michigan claims and may seek appellate review of Thursday's ruling, arguing that a conflicting appellate decision elsewhere would raise the odds of Supreme Court review.
Sources: The Block, crypto.news
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