US Regulatory Body Takes Wisconsin to Court Over Dispute on Prediction Market Oversight

The US state of Wisconsin has become the latest to be sued by the Commodity Futures Trading Commission, which is engaged in a legal campaign to establish its jurisdiction over prediction markets operated by firms like Kalshi and Crypto.com. A number of states have taken action against these companies, alleging breaches of local gaming laws due to betting activities on their expanding platforms. However, the CFTC, led by Chairman Mike Selig, has been pushing back against these states, including New York, Arizona, Illinois, and Connecticut, arguing that it has sole jurisdiction over the trading of event contracts, which it views as a new form of derivatives activity that falls under its purview. Recently, Wisconsin took legal action against Kalshi, Coinbase, Polymarket, Robinhood, and Crypto.com, accusing them of operating unlicensed gambling operations within the state, mirroring 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: "We will take legal action against any state that interferes with federal law regulating financial markets." In a similar development, New York recently sued Coinbase and Gemini over their prediction markets businesses, prompting the CFTC to respond with its own lawsuit against the state. Arizona has also been pursuing a criminal case against Kalshi, but a court ruling earlier this month halted the prosecution, with the judge suggesting that federal law is likely to preempt state gambling laws, potentially leading to the CFTC's success in its case.