US Regulator Takes Wisconsin to Court in Battle for Control of Prediction Markets

The state of Wisconsin has become the latest to be sued by the Commodity Futures Trading Commission, as the agency continues to defend its jurisdiction over prediction markets operated by firms like Kalshi and Crypto.com. A growing number of US states have taken action against these businesses, alleging violations of state gaming laws due to betting activities on their platforms. However, CFTC Chairman Mike Selig has led a legal counterattack against states including New York, Arizona, Illinois, and Connecticut. He argues that the derivatives regulator has exclusive authority over event contracts, which he believes are a new form of derivatives activity that has long been overseen by the CFTC. Recently, Wisconsin filed a lawsuit against Kalshi, Coinbase, Polymarket, Robinhood, and Crypto.com, accusing them of running unlicensed gambling operations within the state. This move echoes similar claims made against the industry in other states. In response, Selig has filed a lawsuit in the US District Court for the Eastern District of Wisconsin, stating that he aims to send a clear message: "If you interfere with federal law regulating financial markets, we will take legal action against you." Last week, New York also sued Coinbase and Gemini over their prediction markets businesses, prompting the CFTC to file 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 in New York and Wisconsin, draw a clear line in the sand. By taking action to block state interference, the commission has sent a strong signal: the era of jurisdictional uncertainty is over." Arizona has been pursuing a criminal case against Kalshi, but a court recently paused the prosecution, citing the likelihood that the federal agency will succeed in its argument that US law preempts state gambling laws.