CFTC Launches Lawsuit Against Wisconsin in Ongoing Battle for Control Over Prediction Markets

The U.S. state of Wisconsin is now a defendant in a lawsuit filed by the Commodity Futures Trading Commission, which is fighting to maintain its jurisdiction over prediction markets operated by companies such as Kalshi and Crypto.com. Wisconsin's inclusion on the list of states being sued by the CFTC is a result of the state's attempts to regulate these platforms under its gaming laws, alongside other states including New York, Arizona, Illinois, and Connecticut. CFTC Chairman Mike Selig has been leading a counterattack against these states, arguing that the agency has sole authority to regulate the trading of event contracts, which he believes are an emerging type of derivatives activity that falls under the CFTC's purview. Recently, Wisconsin took legal action against several companies, including Kalshi, Coinbase, Polymarket, Robinhood, and Crypto.com, alleging that they were operating unlicensed gambling operations within the state. In response, Chairman Selig filed a lawsuit in the U.S. District Court for the Eastern District of Wisconsin, stating that his intention is to send a clear message: "Any interference with federal law regulating financial markets will be met with a lawsuit." This development comes on the heels of New York's lawsuit against Coinbase and Gemini over their prediction markets businesses, which was swiftly followed by a CFTC lawsuit against the state. Additionally, Arizona's pursuit of a criminal case against Kalshi has been put on hold by a court, which has suggested that federal law may preempt state gambling laws, potentially bolstering the CFTC's case.