TLDR
- Federal commodities regulator has filed suit against Wisconsin, marking its fifth state legal battle this month concerning prediction market oversight.
- Last week, Wisconsin targeted Kalshi, Polymarket, Crypto.com, Robinhood, and Coinbase with lawsuits alleging they operate as unlawful gambling businesses.
- CFTC leader Michael Selig maintains the commission holds “exclusive jurisdiction” over event-based prediction contracts under federal statute.
- Similar federal lawsuits have been initiated against New York, Arizona, Connecticut, and Illinois throughout this month.
- An Arizona court has already suspended criminal proceedings against Kalshi, indicating federal regulations may supersede state gaming laws.
The federal commodities watchdog initiated legal proceedings against Wisconsin this Tuesday following the state’s enforcement actions targeting five prediction market operators for purportedly conducting unlicensed gambling activities. The regulatory agency contends that state-level regulations hold no authority in this domain.
Last Thursday, Wisconsin launched its lawsuit naming Kalshi, Polymarket, Crypto.com, Robinhood, and Coinbase as defendants. State authorities maintained that prediction platforms facilitating sports-related event trading constitute prohibited wagering activities under Wisconsin’s gambling statutes.
The federal response came swiftly. The CFTC, working alongside the Justice Department’s Civil Division, filed a counter-suit in the U.S. District Court for the Eastern District of Wisconsin.
This marks the fifth instance this month where the commodities regulator has initiated litigation against a state regarding prediction market authority. Previous legal actions targeted New York, Arizona, Connecticut, and Illinois.
Michael Selig, the CFTC’s Chairman, has spearheaded this aggressive legal strategy. He currently serves as the only active commissioner on what should be a five-member panel.
In his official statement, Selig declared: “States cannot circumvent the clear directive of Congress. Our message to Wisconsin is the same as to New York, Arizona, and others: if you interfere with the operation of federal law in regulating financial markets, we will sue you.”
The federal regulator maintains that prediction markets constitute derivatives instruments. According to the agency, these financial products fall under federal supervision as designated contract markets, placing them beyond state gambling jurisdiction.
Federal vs. State Authority
The central question revolves around which level of government possesses regulatory power over prediction market operations. The CFTC asserts that congressional legislation granted it sole oversight of these contract types.
State governments challenge this interpretation. Their position holds that sports-focused event contracts represent gambling services requiring state gaming authorization. Multiple states have initiated both civil litigation and criminal prosecutions against platform operators.
Recently, an Arizona judge temporarily halted criminal charges against Kalshi. The ruling suggested the CFTC’s argument that federal statutes preempt state gambling regulations appears meritorious.
What the CFTC Is Asking For
Within its Wisconsin filing, the CFTC identified Governor Anthony Evers, Attorney General Josh Kaul, and the Wisconsin Gaming Division as respondents.
The commission requested judicial determination that state gambling statutes do not govern federally supervised prediction markets. Additionally, it seeks a permanent court order preventing Wisconsin from pursuing enforcement against these operators.
Both Coinbase and Robinhood, which trade as public companies, appear among the platforms named in Wisconsin’s state-level complaint. Gemini was separately identified in New York’s distinct legal action against Coinbase.
New York initiated its own lawsuit against Coinbase and Gemini last week targeting their prediction market services. The CFTC countered with federal litigation against New York within days.
The Wisconsin Department of Justice, Division of Gaming, and the Governor’s office had not issued responses to media inquiries by publication time.
