Wisconsin Takes on Prediction Markets, Sues Multiple Companies

The prediction market industry maintains that its products are legitimate financial tools, but Wisconsin disagrees. In a recent lawsuit, the state is targeting companies such as Kalshi, Coinbase, Polymarket, Robinhood, and Crypto.com, citing their own marketing language as evidence of unlawful gambling activity. According to Attorney General Josh Kaul, 'disguising illegal conduct does not make it legal.' The core issue at hand is whether these platforms offer financial instruments or simply facilitate betting, a distinction that will determine whether they are subject to federal or state regulation. Wisconsin's complaints, filed against three separate groups of companies, argue that the 'event contracts' offered by these platforms constitute wagers, with users paying for a chance to win a fixed payout based on real-world outcomes. The state points to the companies' own advertising, such as Kalshi's claim to be 'the first nationwide legal sports betting platform,' as evidence that they are engaged in gambling activities. The industry's defense relies on the argument that their contracts are federally regulated swaps, but Wisconsin and other states contend that these contracts are indistinguishable from traditional bets. The matter is likely to end up in the Supreme Court, as state courts continue to challenge the industry's claims of federal preemption.