US Commodity Futures Trading Commission Takes Wisconsin to Court Over Prediction Market Authority

The US state of Wisconsin is the latest to be sued by the Commodity Futures Trading Commission in its ongoing effort to assert its authority over prediction markets. This move is part of a broader campaign by the agency to defend its jurisdiction over event contract trading on platforms such as Kalshi and Crypto.com. Several states have taken legal action against these businesses, alleging violations of state gaming laws due to the betting activities on their platforms. However, Commodity Futures Trading Commission Chairman Mike Selig has been leading a countercharge against states including New York, Arizona, Illinois, and Connecticut, arguing that his agency has exclusive jurisdiction over the trading of event contracts, which he believes are a form of derivatives activity that falls under the CFTC's purview. Wisconsin recently sued Kalshi, Coinbase, Polymarket, Robinhood, and Crypto.com for operating unlicensed gambling operations within the state, mirroring claims made by other states against the industry. In response, Selig filed a lawsuit in the US District Court for the Eastern District of Wisconsin, stating his intention to send a clear message: "If you interfere with federal law regulating financial markets, we will take legal action." This development comes on the heels of New York's lawsuit against Coinbase and Gemini over their prediction markets businesses, which was swiftly followed by the CFTC's 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 steps to block state overreach, the commission has sent an unmistakable signal that the era of jurisdictional ambiguity is over." Meanwhile, Arizona's criminal case against Kalshi has been put on hold by a court, which suggested that federal law is likely to preempt state gambling laws, potentially paving the way for the CFTC's argument to succeed.