US Regulator Takes Wisconsin to Court in Ongoing Dispute Over Prediction Markets

The US Commodity Futures Trading Commission has expanded its legal campaign to defend its jurisdiction over prediction markets, with Wisconsin becoming the latest state to be sued by the agency. This move is part of a broader effort by the CFTC to establish its authority over the trading of event contracts, which it claims are a form of derivatives subject to federal regulation. Several states, including New York, Arizona, Illinois, and Connecticut, have attempted to crack down on companies such as Kalshi and Crypto.com, alleging that they are violating state gaming laws. However, CFTC Chairman Mike Selig has pushed back against these efforts, arguing that the agency has exclusive jurisdiction over the trading of event contracts. Wisconsin recently joined the fray, suing Kalshi, Coinbase, Polymarket, Robinhood, and Crypto.com for operating unlicensed gambling operations within the state. In response, Chairman Selig filed a lawsuit in the US District Court for the Eastern District of Wisconsin, stating that the agency will take legal action against any state that interferes with the operation of federal law in regulating financial markets. This development is the latest in a series of lawsuits filed by the CFTC against states that have attempted to regulate prediction markets. Last week, New York 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 mark a significant turning point in the dispute. "The era of jurisdictional ambiguity is over," he said, adding that the commission has sent a clear signal by moving to block state encroachment. The issue has also played out in Arizona, where a court recently paused a criminal case against Kalshi, citing the likelihood that federal law will preempt state gambling laws. The CFTC's actions have significant implications for the future of prediction markets and the regulation of financial markets in the US.