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

The US state of Wisconsin has become the latest to be sued by the Commodity Futures Trading Commission, which is determined to establish its jurisdiction over prediction markets operated by firms such as Kalshi and Crypto.com. A number of states have taken action against these companies, alleging breaches of state gaming laws due to betting activities on their expanding platforms. However, CFTC Chairman Mike Selig has been leading a legal counterattack against states including New York, Arizona, Illinois, and Connecticut, arguing that the derivatives regulator has sole jurisdiction over event contract trading, which he believes is a new 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, echoing similar claims made by other states against the industry. In response, Selig has filed a lawsuit in the US District Court for the Eastern District of Wisconsin, stating his intention to send a clear message: 'If you interfere with federal law regulating financial markets, we will take legal action against you.' Also recently, New York sued Coinbase and Gemini over their prediction markets businesses, prompting the CFTC to respond with its own lawsuit against the state. Meanwhile, Arizona has been pursuing a criminal case against Kalshi, but a court has put the prosecution on hold, with the judge suggesting that the federal agency is likely to succeed in its argument that US law will supersede state gambling laws.