US Regulatory Agency Takes Wisconsin to Court Over Prediction Market Dispute

The Commodity Futures Trading Commission has added Wisconsin to its list of defendants in a series of lawsuits aimed at establishing the agency's jurisdiction over prediction markets. This move comes as several states, including Wisconsin, have taken legal action against companies such as Kalshi and Crypto.com, alleging violations of state gaming laws due to betting activities on their platforms. CFTC Chairman Mike Selig has been leading a legal challenge against these states, arguing that the agency has exclusive authority over event-contract trading, which he believes is a form of derivatives activity that falls under the CFTC's purview. Recently, Wisconsin filed a lawsuit against Kalshi, Coinbase, Polymarket, Robinhood, and Crypto.com, accusing them of operating unlicensed gambling operations within the state. In response, Chairman Selig filed a lawsuit in the U.S. District Court for the Eastern District of Wisconsin, stating that the agency will take legal action against any state that interferes with federal law regulating financial markets. This development follows a similar lawsuit filed by New York against 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 mark a significant turning point, signaling the end of jurisdictional ambiguity and establishing a clear stance against state encroachment. In a related case, Arizona's criminal prosecution against Kalshi was paused by a court earlier this month, with the judge suggesting that federal law is likely to preempt state gambling laws, potentially paving the way for the CFTC's argument to prevail.