CFTC Takes Wisconsin to Court in Ongoing Battle for Prediction Markets Oversight

The US state of Wisconsin has become the latest to be sued by the Commodity Futures Trading Commission, as the agency continues to assert its authority over prediction markets operated by companies including Kalshi and Crypto.com. A number of states have taken action against these firms, alleging breaches of local gaming laws due to betting activities on their growing platforms. However, CFTC Chairman Mike Selig has led a counter-legal effort against states such as New York, Arizona, Illinois, and Connecticut, arguing that the derivatives regulator has "exclusive jurisdiction" over event contract trading, which he views as a new form of derivatives activity that falls under the CFTC's purview. Recently, Wisconsin took Kalshi, Coinbase, Polymarket, Robinhood, and Crypto.com to court for operating 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 last week, New York filed a lawsuit against Coinbase and Gemini over their prediction markets businesses, prompting the CFTC to respond with its own lawsuit against the state. 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, mark a significant turning point. By taking action to prevent state overreach, the commission has sent a clear signal that the era of jurisdictional uncertainty is over." Arizona has been pursuing a criminal case against Kalshi, but a court ruling earlier this month paused the prosecution, with the judge suggesting that the federal agency is likely to succeed in its argument that US law preempts state gambling laws.