US Regulatory Agency Takes Wisconsin to Court Over Prediction Market Oversight

The US Commodity Futures Trading Commission has expanded its legal campaign to assert its authority over prediction markets by suing Wisconsin, which recently joined the list of states taking action against businesses like Kalshi and Crypto.com for allegedly violating state gaming laws through their trading activities. Several states, including New York, Arizona, Illinois, and Connecticut, have targeted these companies, but CFTC Chairman Mike Selig has spearheaded a legal challenge, arguing that the agency has sole jurisdiction over event contract trading, an emerging form of derivatives activity. Wisconsin recently sued Kalshi, Coinbase, Polymarket, Robinhood, and Crypto.com for operating unlicensed gambling operations within the state, mirroring claims made by other states. 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 impede the operation of 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 its recent actions in New York and Wisconsin, draw a clear line in the sand. By moving to block state interference, the commission has sent an unmistakable signal: The era of jurisdictional ambiguity is over." Arizona has been pursuing a criminal case against Kalshi, but a court recently paused the prosecution, with the judge suggesting that federal law is likely to preempt state gambling laws, potentially leading to the CFTC's success in its case.