US Regulator Takes Wisconsin to Court Over Prediction Markets Dispute

The US state of Wisconsin has become the latest to be sued by the Commodity Futures Trading Commission, as the agency continues to assert its authority over prediction markets operated by firms such as Kalshi and Crypto.com. A number of states have taken action against these companies, alleging breaches of local gaming laws due to betting activities on their growing platforms. However, CFTC Chairman Mike Selig has led a counter-campaign, arguing that the derivatives regulator has sole jurisdiction over the trading of event contracts, which he believes are a new form of derivatives activity that falls under the CFTC's purview. Recently, Wisconsin took legal action against Kalshi, Coinbase, Polymarket, Robinhood, and Crypto.com, accusing them of running unlicensed gambling operations within the state. This move echoes similar claims made against the industry in other jurisdictions. In response, Selig has 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 legal action against you." 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 action to prevent state overreach, the commission has sent a clear signal: The era of uncertainty over jurisdiction is now over." Arizona has been pursuing a criminal case against Kalshi, but a court ruling earlier this month halted the prosecution, with the judge suggesting that the federal agency is likely to succeed in its argument that US law will take precedence over state gambling laws.