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

The Commodity Futures Trading Commission has added Wisconsin to its list of states being sued for attempting to exert control over prediction markets, which are operated by firms such as Kalshi and Crypto.com. Several states have launched lawsuits against these companies, alleging they are violating state gaming laws through the betting activities on their platforms. However, CFTC Chairman Mike Selig has been leading a counterattack, arguing that his agency has sole jurisdiction over the trading of event contracts, which he claims are a new form of derivatives trading that falls under the CFTC's purview. Wisconsin recently sued Kalshi, Coinbase, Polymarket, Robinhood, and Crypto.com, accusing them of running unlicensed gambling operations within the state. This mirrors similar 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 action against you." Just 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 filed in New York and Wisconsin, draw a clear line in the sand. By taking steps to prevent state overreach, the commission has sent an unmistakable signal that the era of ambiguity regarding jurisdiction is now over." Meanwhile, Arizona has been pursuing a criminal case against Kalshi, but a court recently paused the prosecution, suggesting that the federal agency is likely to succeed in its argument that US law preempts state gambling laws.