US Commodity Futures Trading Commission Takes Wisconsin to Court

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 jurisdiction over prediction markets operated by firms such as Kalshi and Crypto.com. This move comes after several states, including New York, accused these businesses of violating state gaming laws through their betting operations on emerging platforms. However, CFTC Chairman Mike Selig has led a strong legal counterattack, arguing that the derivatives regulator has exclusive authority over 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, alleging that they were operating unlicensed gambling operations within the state. In response, Selig filed a lawsuit in the US District Court for the Eastern District of Wisconsin, stating that his intention is to send a clear message: "If you interfere with federal law regulating financial markets, we will take legal action against you." In a similar move, New York recently 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, mark a significant turning point. "By taking steps to block state overreach, the commission has sent a clear signal: the era of uncertainty regarding jurisdiction is now over," he said. Meanwhile, Arizona has been pursuing a criminal case against Kalshi, but a court has put the prosecution on hold, citing the likelihood that the federal agency will succeed in its argument that US law preempts state gambling laws.