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

The US state of Wisconsin has become the latest target in the Commodity Futures Trading Commission's legal campaign to assert its dominance over prediction markets. This development comes as several states, including New York, have attempted to crack down on businesses such as Kalshi and Crypto.com for allegedly violating state gaming laws through their betting operations. However, CFTC Chairman Mike Selig has been leading a countercharge, arguing that his agency has sole jurisdiction over event contracts, which he claims are a new form of derivatives activity that falls under the CFTC's purview. Recently, Wisconsin took legal action against Kalshi, Coinbase, Polymarket, Robinhood, and Crypto.com, accusing them of running unlicensed gambling operations within the state. In response, Selig has filed a lawsuit in the US District Court for the Eastern District of Wisconsin, stating that his intention is to send a clear message: any interference with federal law regulating financial markets will be met with legal action. This move follows a similar lawsuit filed by the CFTC 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 mark a decisive turning point, signaling the end of jurisdictional ambiguity. Meanwhile, a court in Arizona has paused a criminal case against Kalshi, suggesting that federal law may preempt state gambling laws. The CFTC's actions have significant implications for the future of prediction markets and the regulation of financial markets in the US.