Could California Be Next To Stop Sports Contracts In The State?

The tide is turning against top prediction markets like Kalshi and Polymarket. Two states — Michigan and Utah — have finally had success in banning sports contracts.

Now 39 other states, including California, are supporting Utah’s legal fight against these platforms. And by support, we mean they want to follow Utah’s lead in getting sports contracts out of their state.

This feels like the first time in a long time that prediction markets are on the defensive side. It’s not like they haven’t been sued ad nauseam before (they have), but so far, they’ve stayed in business. But wins by the states of Michigan and Utah is threatening their future. Keep on reading and we’ll tell you everything going on!

Utah Goes After Kalshi And Its Founders

Utah is one of the anti-legal betting states in the country, and they’re fighting tooth and nail to keep it that way.

At the tail-end of October, Attorney General Derek Brown filed 14 criminal charges against Kalshi and its co-founders, Tarek Mansour and Luana Lopes Lara. Yes, criminal charges for, get this, 12 felony counts of online gambling promotion, another felony alleging a pattern of unlawful activity, and a misdemeanor gambling-promotion charge.

According to charging documents, an undercover investigator opened an account using an Utah address, phone number, and locally issued debit card. Kalshi also required him to confirm his location before trading. He then freely placed 12 sports wagers in September. This, in the eyes of Utah, was a sign the platform knew where he was and let him bet anyway — hence the charges.

Kalshi still works in Utah as of this writing, but feeling the pressure, other sports betting apps quit offering sports contracts. DraftKings Predictions, FanDuel Predicts, and Fanatics Markets all halted contracts in the state.

But wait, that’s not all! Robinhood said it would restrict new Utah positions on sports, culture, elections, and politics starting November 2, while retaining categories such as finance and economics. That’s a huge blow since midterms are the day after.

Utah isn’t completely in the clear yet, though. The Commodity Futures Trading Commission (CFTC) has sued the state, arguing federal commodities law gives it exclusive authority over these contracts. That might not hold up, though, given a previous ruling. You see, in August, U.S. District Judge Robert Shelby rejected Kalshi’s argument that federal law shielded it from Utah’s gambling restrictions, and the appeals court declined to block enforcement while the appeal proceeds.

The lack of consistency in rulings, not just in Utah, but across the country, is why everyone’s so frustrated. One court can side with Utah, but then another court can side with prediction markets. Then at that point, no one knows which ruling takes precedence.

California Joins Dozens Of States Backing Utah

What’s going on in Utah matters nationally. Let’s just say there are a lot of watchful eyes on the matter, and that includes in the Golden State.

On October 29, California’s Attorney General Rob Bonta announced he had joined a bipartisan coalition of 37 attorneys general supporting Utah in the Tenth Circuit appeal. The coalition includes Republican-led states like Alabama and Idaho alongside Democratic-led states like Massachusetts and New York — so it’s very much a bipartisan issue.

“Prediction markets cannot use federal loopholes to bypass state consumer protection, sports gaming, and gambling laws,” Bonta said.

There is no sports betting in California. Casino betting is controlled by Native American tribes, and if sports betting were to be legalized, it too would likely be tribal led. And the state sure doesn’t want prediction markets getting in the way of that.

That’s why the state has been so active in this national fight against Kalshi and company. California has supported similar efforts in the Third, Fourth, Sixth and Ninth Circuits, plus New Jersey’s request for Supreme Court review.

Now, a Utah win here wouldn’t automatically shut off California’s sports contracts. But… it would add another appellate ruling against the federal protection operators rely on. For California officials looking to ban those prediction market products too, that would be a big, big advantage to have in your back pocket.

Michigan Gets Polymarket To Back Down

Utah isn’t the only state on the offensive. Michigan is too, and they’re on the scoring end of things

On October 28, its Gaming Control Board announced that Polymarket US had agreed to stop offering new sports event contracts to Michigan customers. Any remaining positions customers haven’t closed voluntarily must be closed out by the end of November 25.

Polymarket is the fourth prediction market to close up shop in Michigan, for now at least. Also exited were Coinbase, Robinhood and Kalshi. Three reached agreements with the state, while Kalshi was hit with a preliminary injunction.

Under Polymarket’s court-approved agreement, Michigan will hold off on enforcement as long as the company complies. That’s a negotiated withdrawal, not Polymarket conceding the entire legal argument. So it’s not over yet, by any means.

In fact, Polymarket is still appealing. It sued Michigan officials in March to stop enforcement, but a federal judge rejected its request for a temporary restraining order that month and denied a preliminary injunction in June. The state then warned it on September 10 that legal action would follow if it kept offering sports contracts.

Again, we don’t expect these prediction platforms to “go quietly into the night” and accept their fate. Far from it, but it’s a surprise to see them finally lose some battles.