US Regulator Takes Wisconsin to Court Over Prediction Markets Oversight

The US Commodity Futures Trading Commission has added Wisconsin to its list of defendants in a series of lawsuits aimed at asserting its jurisdiction over prediction markets. This move is part of a broader effort by the agency to defend its regulatory authority against state-level challenges. Wisconsin recently joined several other states, including New York, Arizona, Illinois, and Connecticut, in suing companies such as Kalshi and Crypto.com for allegedly violating state gaming laws through their prediction markets activities. However, CFTC Chairman Mike Selig has consistently argued that his agency has 'exclusive jurisdiction' over event contracts, which he considers a form of derivatives trading that falls under federal oversight. In response to Wisconsin's lawsuit against Kalshi, Coinbase, Polymarket, Robinhood, and Crypto.com for operating unlicensed gambling operations, Selig filed a lawsuit in the US District Court for the Eastern District of Wisconsin, emphasizing that the CFTC will take action against any state that interferes with federal law in regulating financial markets. This development follows a similar lawsuit filed by the CFTC against New York, which had 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 mark a significant turning point, signaling the end of jurisdictional ambiguity and reaffirming the agency's commitment to regulating financial markets at the federal level. Meanwhile, a court in Arizona has paused a criminal case against Kalshi, citing the likelihood that federal law will preempt state gambling laws. The CFTC's actions have significant implications for the future of prediction markets and the balance of power between federal and state regulators.