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

The Commodity Futures Trading Commission has added Wisconsin to its growing list of states being sued over the regulation of prediction markets, as the agency asserts its authority over the trading of event contracts on platforms such as Kalshi and Crypto.com. Several states have taken action against these companies, alleging that they are violating state gaming laws through the betting taking place on their platforms. However, CFTC Chairman Mike Selig has led a counterattack against states including New York, Arizona, Illinois, and Connecticut, arguing that the CFTC has exclusive jurisdiction over the trading of event contracts, which he claims are a new form of derivatives activity that falls under the agency's purview. Recently, Wisconsin sued Kalshi, Coinbase, Polymarket, Robinhood, and Crypto.com for operating unlicensed gambling operations in the state, echoing 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 that he aims to send a clear message: "If you interfere with the operation of federal law in regulating financial markets, we will take legal action against you." Earlier, 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, including its recent actions in New York and Wisconsin, represent a clear boundary." VanGrack added that by taking action to block state interference, the commission has sent a strong signal: the era of ambiguity regarding jurisdiction is over. Arizona has been pursuing a criminal case against Kalshi, but a court has paused the prosecution, with the judge arguing that the federal agency is likely to succeed in its claim that US law will preempt state gambling laws.