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

The Commodity Futures Trading Commission has added Wisconsin to its list of states being sued for challenging the agency's jurisdiction over prediction markets, which are offered by companies such as Kalshi and Crypto.com. Several states, including New York, have taken action against these firms, alleging they are violating state gaming laws through the betting taking place on their platforms. However, CFTC Chairman Mike Selig has been leading a legal counterattack, arguing that his agency has "exclusive jurisdiction" over event contracts, which he considers a new form of derivatives activity that falls under the CFTC's purview. Recently, Wisconsin sued Kalshi, Coinbase, Polymarket, Robinhood, and Crypto.com for operating unlicensed gambling operations within the state, echoing similar claims made by other states against the industry. In response, Chairman Selig filed a lawsuit in the US District Court for the Eastern District of Wisconsin, stating that his goal is to send a clear message: "If you interfere with federal law regulating financial markets, we will take legal action against you." The CFTC's lawsuit against Wisconsin comes on the heels of a similar lawsuit filed against New York last week, after the state sued Coinbase and Gemini over their prediction markets businesses. According to Ryan VanGrack, Coinbase's vice president of legal and head of global litigation, "The CFTC's lawsuits, including those filed in New York and Wisconsin, draw a clear line in the sand. By taking action to block state overreach, the commission has sent a strong signal that the era of jurisdictional uncertainty is over." Arizona has also been pursuing a criminal case against Kalshi, but a court recently paused the prosecution, suggesting that federal law is likely to preempt state gambling laws, and the CFTC is likely to succeed in its argument.