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

The state of Wisconsin has become the latest target in the Commodity Futures Trading Commission's aggressive legal push to establish its jurisdiction over prediction markets, which involve trading on platforms such as Kalshi and Crypto.com. This move comes as several states, including New York, have taken action against these companies, alleging violations of state gaming laws due to the betting activities on their growing platforms. However, CFTC Chairman Mike Selig has spearheaded a counterattack, arguing that the agency has sole jurisdiction over event contracts, which he views as a new form of derivatives activity that falls under the CFTC's traditional regulatory scope. Recently, Wisconsin joined the fray by suing Kalshi, Coinbase, Polymarket, Robinhood, and Crypto.com for operating unlicensed gambling operations within the state, echoing similar claims made by other states. In response, Chairman Selig filed a lawsuit in the US District Court for the Eastern District of Wisconsin, emphasizing that the CFTC will take legal action against any state that interferes with federal law in regulating financial markets. This development follows a similar pattern, as seen last week when 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 those in New York and Wisconsin, mark a clear boundary. By taking steps to block state intervention, the commission has sent a strong signal that the era of jurisdictional uncertainty is coming to an end. In a related case, Arizona has been pursuing a criminal case against Kalshi, but the prosecution was put on hold earlier this month when a judge ruled that federal law is likely to preempt state gambling laws, suggesting the CFTC's argument may prevail.