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

The Commodity Futures Trading Commission has escalated its jurisdictional dispute with US states by suing Wisconsin, which recently joined other states in taking legal action against firms like Kalshi and Crypto.com for allegedly violating state gaming laws through their prediction markets activities. Led by Chairman Mike Selig, the CFTC has been pushing back against states including New York, Arizona, Illinois, and Connecticut, arguing that it has sole authority over event contracts, a form of derivatives trading. Wisconsin recently filed a lawsuit against Kalshi, Coinbase, Polymarket, Robinhood, and Crypto.com, accusing them of operating unlicensed gambling operations within the state. In response, the CFTC filed a lawsuit in the US District Court for the Eastern District of Wisconsin, with Selig stating that the agency will take legal action against any state that interferes with federal law regulating financial markets. This development follows a similar lawsuit filed by New York against Coinbase and Gemini, to which the CFTC responded with its own lawsuit. According to Ryan VanGrack, Coinbase's vice president of legal and head of global litigation, the CFTC's actions demonstrate a clear stance against state encroachment, signaling the end of jurisdictional ambiguity. In a related case, Arizona's criminal prosecution of Kalshi has been paused by a court, which suggested that federal law is likely to preempt state gambling laws, potentially paving the way for the CFTC's authority to be upheld.