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

The US state of Wisconsin has become the latest to be sued by the Commodity Futures Trading Commission in a dispute over the regulator's jurisdiction over prediction markets. This move is part of a broader effort by the CFTC to defend its authority in the face of pushback from several states, including New York, Arizona, Illinois, and Connecticut. At the heart of the issue is the question of whether event contracts, which allow users to bet on the outcome of various events, fall under the purview of state gaming laws or federal derivatives regulations. CFTC Chairman Mike Selig has taken a firm stance, arguing that his agency has exclusive jurisdiction over these contracts, which he views as a form of derivatives activity. Wisconsin recently joined the ranks of states taking legal action against companies such as Kalshi and Crypto.com, accusing them of operating unlicensed gambling operations within the state. In response, Chairman Selig has filed a lawsuit in the US District Court for the Eastern District of Wisconsin, emphasizing that any interference with federal law in regulating financial markets will be met with legal action. This development comes on the heels of similar lawsuits filed by the CFTC against other states, including New York, where the regulator is challenging the state's efforts to shut down prediction markets operated by companies like Coinbase and Gemini. According to Ryan VanGrack, Coinbase's vice president of legal and head of global litigation, the CFTC's actions mark a significant turning point, signaling the end of jurisdictional ambiguity and asserting the commission's authority in regulating financial markets. The ongoing legal battles between the CFTC and various states have also led to the pause of a criminal case against Kalshi in Arizona, with the presiding judge suggesting that federal law is likely to preempt state gambling laws.