US Regulatory Body Takes Wisconsin to Court Over Prediction Market Control

The US state of Wisconsin is the latest to be sued by the Commodity Futures Trading Commission in an ongoing effort to establish the agency's jurisdiction over prediction markets, which involve trading at companies such as Kalshi and Crypto.com. This move comes as several states, including New York, have taken action against these businesses, alleging violations of local gaming laws due to betting activities on their platforms. However, the CFTC, led by Chairman Mike Selig, has been pushing back against these states, including Arizona, Illinois, and Connecticut, arguing that it has exclusive authority over event contracts, which are seen as a new form of derivatives trading. Recently, Wisconsin took legal action against Kalshi, Coinbase, Polymarket, Robinhood, and Crypto.com, accusing them of operating unlicensed gambling operations within the state, echoing claims made in other jurisdictions. In response, Chairman Selig filed a lawsuit in the US District Court for the Eastern District of Wisconsin, stating his intention to send a clear message: "Interference with federal law in regulating financial markets will result in legal action." This development follows a similar lawsuit filed by New York 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 in New York and Wisconsin, mark a significant boundary. By acting to prevent state overreach, the commission has sent a clear signal that the era of uncertainty regarding jurisdiction is ending." Arizona has also been pursuing a criminal case against Kalshi, but the prosecution was recently paused by a court, which suggested that federal law is likely to preempt state gambling laws, potentially leading to the CFTC's success in its case.