Wisconsin Takes on Prediction Market Operators in Lawsuit

Wisconsin has filed a complaint against several prediction market operators, including Kalshi, Coinbase, Polymarket, Robinhood, and Crypto.com, alleging that their platforms facilitate unlicensed gambling. The state argues that the companies' marketing materials reveal their true nature as betting platforms, rather than financial instrument providers. The lawsuit centers on the question of whether these platforms' 'event contracts' constitute bets or financial instruments under federal law. Wisconsin's complaints target three separate ecosystems, each involving different companies and their affiliates, and claim that they collectively enable sports betting for state residents. The state's legal theory is that users are essentially placing wagers on real-world outcomes, with payouts determined by the outcome. The complaint cites examples of Instagram ads from Kalshi and Polymarket that explicitly describe their platforms as betting venues. The state argues that the structure of these prediction markets falls within its definition of a bet, regardless of how the products are labeled. The industry's defense relies on federal preemption, with companies like Kalshi arguing that their contracts are regulated by the Commodity Futures Trading Commission (CFTC). However, state courts have consistently taken a different stance, with Nevada and New York characterizing the contracts as indistinguishable from gambling. The Wisconsin lawsuit is the latest in a series of state challenges that may ultimately lead to a Supreme Court decision on the matter.