TLDR
- Wisconsin becomes the fifth state sued by the CFTC this month in a dispute over who regulates prediction markets.
- Last week, Wisconsin filed legal action against Kalshi, Polymarket, Crypto.com, Robinhood, and Coinbase, alleging illegal gambling activities.
- CFTC Chairman Michael Selig maintains the federal agency holds “exclusive jurisdiction” over event contracts in prediction markets.
- Similar federal lawsuits have been initiated against New York, Arizona, Connecticut, and Illinois throughout the month.
- An Arizona court has already halted criminal proceedings against Kalshi, indicating federal authority may supersede state gambling regulations.
The Commodity Futures Trading Commission initiated legal proceedings against Wisconsin this Tuesday following the state’s enforcement actions against five prediction market operators accused of conducting unlicensed gambling activities. The federal regulator contends that state gambling statutes have no authority in this domain.
Last Thursday, Wisconsin initiated litigation targeting Kalshi, Polymarket, Crypto.com, Robinhood, and Coinbase. State authorities maintained that prediction platforms facilitating sports-related event contracts violate Wisconsin’s gambling statutes.
The CFTC’s response was swift. The agency, working alongside the Justice Department’s Civil Division, filed proceedings in the U.S. District Court for the Eastern District of Wisconsin.
This marks the fifth instance this month where the CFTC has taken legal action against a state concerning prediction market oversight. Previous suits targeted New York, Arizona, Connecticut, and Illinois.
Michael Selig, the CFTC Chairman, has spearheaded this legal campaign. He currently serves as the only sitting member of what should be a five-commissioner board.
In a public statement, Selig declared: “States cannot circumvent the clear directive of Congress. Our message to Wisconsin is the same as to New York, Arizona, and others: if you interfere with the operation of federal law in regulating financial markets, we will sue you.”
According to the CFTC, prediction markets constitute derivatives trading. The agency asserts these instruments belong under federal supervision as designated contract markets, removing them from state gambling jurisdiction.
Federal vs. State Authority
At the heart of this legal confrontation lies the question of regulatory jurisdiction over prediction markets. The CFTC maintains Congress granted it sole authority to oversee these financial instruments.
State governments take a different position. Their argument centers on sports-related event contracts being gambling products requiring state gaming authorization. Multiple states have launched both civil litigation and criminal prosecutions targeting these platforms.
Recently in Arizona, a judge suspended criminal proceedings against Kalshi. The ruling suggested the CFTC would likely prevail in demonstrating federal law supremacy over state gambling statutes.
What the CFTC Is Asking For
The Wisconsin complaint identifies Governor Anthony Evers, Attorney General Josh Kaul, and the Wisconsin Gaming Division as defendants.
The federal agency seeks a judicial declaration that state gambling regulations do not govern federally supervised prediction markets. Additionally, the CFTC requests a permanent injunction preventing Wisconsin from pursuing enforcement against these platforms.
Both Coinbase and Robinhood, publicly listed corporations, appear among the platforms named in Wisconsin’s state litigation. Meanwhile, Gemini faces inclusion in New York’s separate legal action against Coinbase.
New York filed suit against Coinbase and Gemini last week regarding their prediction market offerings. The CFTC countered with its own lawsuit against New York within days.
At publication time, the Wisconsin Department of Justice, Division of Gaming, and Governor Evers’ office had not provided responses to media inquiries.
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