Michigan Announces Investigation Into Prediction Markets

It had already been rumored that Michigan was investigating sports prediction markets, but the state made an official announcement on Friday.

Henry Williams, chair of the Michigan Gaming Control Board (MGCB) commented:

“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.”

The full announcement can be seen on the MGCB’s official website.

Sports betting is not an investment

The MCGB referenced concerns over deceiving the public and additional risks to players.

“Sports betting is meant to be a form of entertainment, not a financial investment,” Williams added. “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+ age requirement for legal sports betting.”

With licensed operators held to strict rules and regulations, there has been a rise of alternative gambling markets. Many operators allow customers from anywhere and do not perform the same Know Your Customer (KYC) protocols.

No KYC sportsbooks and casinos have gained popularity with crypto users as they offer fast ways to gamble online without as many checks.

Sports prediction markets are fair and legal

States have been battling sweepstakes casinos and prediction markets across the country. Some states have managed to drive the sweepstakes casinos out, most notably in New York. Many operators announced their withdrawal from the Big Apple this month.

Sports prediction markets have been harder to tackle, however. Kalshi has been the main company representing prediction market operators in the news recently. They scored a victory in a Nevada court last week when a judge ruled that their event contracts “are legal under federal law”.

Six states sent cease-and-desist letters, but this mini-victory in Nevada reaffirms Kalshi’s stance that they are beyond the control of states.

Instead, the Commodity Futures Trading Commission (CFTC) are responsible for overseeing operations. The CFTC has also grown concerned about the growth of the events contracts, however. Last year they objected to the election prediction markets and they will hold a roundtable later this month about the sports prediction markets.

Unlicensed sports betting dominates Michigan

When it all comes down to it, the main issue here is that the sports prediction market operators do not pay taxes. This is a particular concern in Michigan. Last week a study revealed that unlicensed sportsbooks in the state made $896 million of revenue in 2024. This was almost double the $470 million that licensed sportsbooks made.

That is a big amount of lost tax. Michigan collected $14.7 million from legal sports betting taxes last year. If the unlicensed operators were contributing that could be vastly increased.

The MGCB stated that they will continue to investigate the phenomenon of sports prediction markets, but in the meantime, they are thriving. Kalshi reported they saw more trading volume on the Masters this weekend than the Super Bowl.

States will be hopeful the CFTC roundtable later this month brings better news than the Nevada courts last week.