Coinbase Loses Michigan Injunction Fight Over Sports Event…

Coinbase has lost its bid for a preliminary injunction that would have shielded its planned sports event-contract offerings from Michigan state enforcement. U.S. District Judge Shalina Kumar of the Eastern District of Michigan ruled Thursday that the exchange failed to show it was likely to succeed on its argument that federal commodities law preempts state gambling regulation.

The exchange sued Michigan in December 2025 after seeking to offer event contracts from Kalshi, including to Michigan residents. Coinbase argued that those products fall under the exclusive jurisdiction of the Commodity Futures Trading Commission through the federal Commodity Exchange Act, not state gambling authorities. Michigan, however, asserted its own oversight under the Lawful Sports Betting Act.

Judge Kumar rejected Coinbase's preemption theory at the preliminary stage, finding that the exchange had not established that sports event contracts qualify as swaps under the Commodity Exchange Act. The judge also was not persuaded that complying with both federal and state regimes was impossible. "Coinbase's averments are, in a word, applesauce," Kumar wrote, adding that compliance was not impossible merely because it is "costly and challenging."

The ruling does not resolve the broader lawsuit, but it leaves Coinbase exposed to potential Michigan enforcement while litigation continues. It also weakens Coinbase's effort to secure early judicial support for the view that federal derivatives rules automatically displace state gaming laws. The decision may affect how other states approach prediction markets, which operators argue are financial instruments traded on exchanges rather than sportsbook wagers.

Coinbase is pursuing similar legal challenges against Illinois and Connecticut, and its chief legal officer, Paul Grewal, has emphasized that prediction markets match buyers and sellers rather than set odds against customers. The jurisdictional fight has also drawn in the CFTC, which has been involved in litigation with multiple states, including Kentucky as the ninth state to join such disputes in June. The CFTC also introduced rules in June aimed at preserving support for sports-related event contracts despite state objections.

The outcome means the path to nationwide distribution for sports event contracts remains uncertain. Courts will ultimately decide whether the Commodity Exchange Act displaces state betting laws or whether platforms must navigate a patchwork of state restrictions that raises compliance costs and limits market access.