Michigan regulator: Sports event contracts “undercut the integrity” of legal market
State gaming authority describes the product as “unlicensed sports betting” and outlines its concerns over lost tax revenue and lack of consumer protections
The Michigan Gaming Control Board (MGCB) has launched an investigation into sports prediction markets operating in the state and vowed to “take all the necessary steps deemed appropriate.”
The regulator announced the investigation on April 11 amid concerns over a lack of consumer protection, as scrutiny on the sector continues to ramp up after a recent flurry of cease-and-desist orders from several states.
All three prominent prediction markets operators, Kalshi, Robinhood, and Crypto.com, have received warnings from the Illinois Gaming Board (IGB), Ohio Casino Control Commission (OCCC), and the Maryland Lottery and Gaming Control Commission (MLGCC).
Kalshi has also received warnings and is engaged in legal disputes with the Nevada Gaming Control Board (NGCB) and the New Jersey Division of Gaming Enforcement (DGE), alongside a cease-and-desist order from the Montana Gambling Control Division (MGCD).
While the MGCB is yet to issue any cease-and-desist warnings of its own, it has revealed that its investigation into prediction markets “aligns with similar actions already taken by other state regulatory bodies.”
The regulator noted that the prediction markets, which are accessible to over 18s in all 50 states, is a form of “unlicensed sports betting” that “may jeopardize the integrity of Michigan’s legal sports betting framework”.
Henry Williams, MGCB executive director, explained: “We take consumer protection very seriously and are committed to ensuring that Michigan residents are engaging with safe and legal sports betting options.
“Unlicensed entities not only pose a risk to consumers but also undercut the integrity and revenue-generating potential of the state’s regulated sports betting industry.
“We are actively investigating these practices and will pursue appropriate measures to protect Michigan bettors.”
With sports event contracts regulated at federal level by the Commodity Futures Trading Commission (CFTC), the likes of Kalshi, Robinhood, and Crypto.com have been able to roll out the product whilst circumventing rules enforced by state-level authorities.
The MGCB has bemoaned the branding of sports event contracts as “innovative financial products”, suggesting that describing them in such fashion can create confusion among bettors and blur the lines between sports betting and financial trading.
Williams continued: “Sports betting is meant to be a form of entertainment, not a financial investment.
“By framing sports contracts as investment vehicles, these platforms risk confusing consumers and undermining the state’s commitment to responsible gaming.
“Moreover, many of these unlicensed platforms are often accessible to individuals as young as 18, in stark contrast to Michigan’s 21 and over age requirement for legal sports betting.”
Detailing its concerns over consumer protection failings, the MGCB added that the contracts raise risks of fraud, identity theft, and inadequate data security.