US Regulator Takes Wisconsin to Court Over Prediction Markets Dispute

The Commodity Futures Trading Commission has added Wisconsin to its list of states being sued for attempting to exert control over prediction markets, which the agency claims fall under its jurisdiction. This move is part of a broader effort by the CFTC to defend its regulatory authority over such markets, particularly against states that accuse firms like Kalshi and Crypto.com of violating local gaming laws. CFTC Chairman Mike Selig has been at the forefront of this legal pushback, asserting that the agency has exclusive jurisdiction over event contracts, which he views as a form of derivatives activity that the CFTC has traditionally regulated. This stance has led to legal confrontations with several states, including New York, Arizona, Illinois, and Connecticut. Recently, Wisconsin took legal action against several companies, including Kalshi, Coinbase, Polymarket, Robinhood, and Crypto.com, alleging they operate 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, emphasizing the CFTC's intention to protect federal law in regulating financial markets. Similar lawsuits have been filed against other states, with the CFTC suing New York after the state took action against Coinbase and Gemini over their prediction markets businesses. According to Ryan VanGrack, Coinbase's vice president of legal and head of global litigation, these lawsuits mark a significant point of clarity in the jurisdictional dispute, signaling the end of ambiguity regarding the CFTC's authority. Arizona's pursuit of a criminal case against Kalshi has also been impacted, with a court recently halting the prosecution based on the likelihood that federal law will preempt state gambling laws. This series of legal actions underscores the ongoing struggle between federal regulatory authority and state-level oversight of emerging financial markets.