Unlockable: Characters
Fygar - You must complete Rally Cup on Hard Difficulty.
Pooka - You must complete 'Rally Cup' on Normal Difficulty.
The Prince - You must complete Rally Cup on Easy.

Unlockables: Tracks
Easy Classic Cup - You must obtain a Gold Medal in Easy Watermelon Cup
Easy Rally Cup - You must obtain a Gold Medal in Easy Classic Cup
Easy Watermelon Cup - You must obtain a Gold Medal in Cherry Cup and Grapy Cup

Unlockable: Nightmare Difficulty
Beat all the cups on Hard Mode with a gold trophy.

Source? Here it is.

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