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

The U.S. state of Wisconsin is now a defendant in a lawsuit filed by the Commodity Futures Trading Commission, which is fighting to establish its jurisdiction over prediction markets operated by firms like Kalshi and Crypto.com. Several U.S. states, including New York, have launched their own lawsuits against these businesses, alleging violations of state gaming laws due to betting activities on their platforms. However, CFTC Chairman Mike Selig has been leading a counterattack, arguing that his agency has sole authority over the trading of event contracts, which he believes 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. This move was met with a response from Chairman Selig, who filed a lawsuit in the U.S. District Court for the Eastern District of Wisconsin, stating that his intention is to send a clear message: "If you interfere with federal law regulating financial markets, we will take legal action against you." In a similar development, New York recently 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 filed in New York and Wisconsin, draw a clear line in the sand. By taking action to block state overreach, the commission has sent a strong signal that the era of jurisdictional uncertainty is over." Meanwhile, Arizona has been pursuing a criminal case against Kalshi, but a court ruling earlier this month put the prosecution on hold, with the judge suggesting that the federal agency is likely to succeed in its argument that U.S. law preempts state gambling laws.