CFTC Takes Wisconsin to Court in Ongoing Battle for Control Over Prediction Markets

Wisconsin is the latest US state to be sued by the Commodity Futures Trading Commission in its bid to establish jurisdiction over prediction markets operated by firms such as Kalshi and Crypto.com. Several states, including New York, have pursued these businesses for allegedly breaching state gaming laws through betting activities on their platforms. However, CFTC Chairman Mike Selig has spearheaded a legal counterattack, arguing that his agency has exclusive authority over the trading of event contracts, which he views as a form of derivatives activity that falls under the CFTC's purview. Recently, Wisconsin took legal action against Kalshi, Coinbase, Polymarket, Robinhood, and Crypto.com, accusing them of running unlicensed gambling operations within the state. In response, Selig has filed a lawsuit in the US District Court for the Eastern District of Wisconsin, stating that his intention is to send a clear message: "If you impede the operation of federal law in regulating financial markets, we will take legal action against you." The CFTC's lawsuit against Wisconsin follows a similar pattern, as the agency recently sued New York after the state took action against Coinbase and Gemini over their prediction markets businesses. In a related development, Arizona's criminal case against Kalshi has been put on hold, with the court suggesting that federal law is likely to preempt state gambling laws, potentially paving the way for the CFTC's argument to succeed.