CFTC Launches Lawsuit Against Wisconsin in Ongoing Battle for Prediction Markets Oversight

The Commodity Futures Trading Commission has added Wisconsin to the list of states it is taking to court, as part of its efforts to assert jurisdiction over prediction markets operated by companies such as Kalshi and Crypto.com. Several US states have cracked down on these businesses, alleging that they are violating state gaming laws through the betting activities on their platforms. However, CFTC Chairman Mike Selig has been leading a legal pushback against these states, including New York, Arizona, Illinois, and Connecticut. He argues that the CFTC has exclusive jurisdiction over event contracts, which he believes are a new form of derivatives activity that the agency has traditionally regulated. Recently, Wisconsin filed a lawsuit against Kalshi, Coinbase, Polymarket, Robinhood, and Crypto.com, accusing them of running unlicensed gambling operations in the state. This move echoes similar claims made against the industry in other states. In response, Chairman 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 states interfere with the operation of federal law in regulating financial markets, the CFTC will take legal action. Last week, New York also sued 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 turning point. By taking action to block state encroachment, the commission has sent a clear signal that the era of jurisdictional ambiguity 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.