US Commodity Futures Trading Commission Takes Wisconsin to Court Over Prediction Markets

The US state of Wisconsin has become the latest to be sued by the Commodity Futures Trading Commission in a dispute over the regulator's authority to oversee prediction markets, with firms such as Kalshi and Crypto.com at the center of the controversy. A number of states have taken action against these companies, alleging breaches of local gaming laws through the betting activities taking place on their platforms. However, Commodity Futures Trading Commission Chairman Mike Selig has been leading a legal challenge against states including New York, Arizona, Illinois, and Connecticut, arguing that his agency has sole jurisdiction over the trading of event contracts, which he views as a form of derivatives activity that falls under the commission's purview. Recently, Wisconsin sued several companies, including Kalshi, Coinbase, Polymarket, Robinhood, and Crypto.com, for operating unlicensed gambling operations within the state, echoing similar claims made by other states. 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: "If you interfere with the operation of federal law in 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 Commodity Futures Trading Commission 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 Commodity Futures Trading Commission's lawsuits, including those filed in New York and Wisconsin, represent a clear boundary." VanGrack added, "By taking action to block state interference, the commission has sent an unmistakable signal: the era of uncertainty over jurisdiction is now over." Arizona has been pursuing a criminal case against Kalshi, but a court in the state recently paused the prosecution, with the judge suggesting that the federal agency is likely to succeed in its argument that US law will take precedence over state gambling laws.