CFTC Sues Wisconsin Over Attempts to Stop Prediction Markets

^{Wisconsin Attorney General Josh Kaul believes prediction markets offer illegal sports betting within his state. (Photo: Morry Gash / AP / Alamy)}

The Commodity Futures Trading Commission (CFTC) announced Tuesday that it was suing senior officials in Wisconsin in an attempt to halt the state’s attempts at suing several prediction market platforms.

Wisconsin Attorney General Josh Kaul filed three lawsuits on April 23, seeking to halt Kalshi, Robinhood, Coinbase, Polymarket, Crypto.com, and affiliates of those sites from offering alleged illegal sports betting in the state.

Feds, State Regulators Continue Jurisdiction Battle

That lawsuit continued the ongoing debate over exactly what it is that prediction markets are offering, particularly when it comes to their sports event contracts. While prediction markets maintain that these are financial swaps that are federally regulated by the CFTC, gaming regulators across the country say they simply offer sports betting markets – including moneyline bets, spreads, and totals – under a different name.

“Thinly disguising unlawful conduct doesn’t make it lawful,” Kaul said in a statement. “These companies’ alleged facilitation of sports betting in Wisconsin should be shut down.”

However, the CFTC has aggressively defended prediction markets and its own exclusive jurisdiction to regulate the industry. In its lawsuit, filed in the US District Court for the Eastern District of Wisconsin, the CFTC targets Governo Tony Evers, Kaul, and John Dillett, who serves as the administrator of the Wisconsin Department of Administration Division of Gaming. The lawsuit seeks an injunction preventing Wisconsin from taking action against the prediction markets.

“This Court should put an end to the ongoing efforts by defendants to undermine the uniform application of federal law by declaring that Wisconsin gambling and betting bans or regulations are preempted by federal law as applied to event contract swaps listed for trading on CFTC-regulated DCMs and are thus unlawful,” the CFTC complaint reads.

Wisconsin has now become the fifth state to be sued by the CFTC, which has previously filed complaints against Arizona, Connecticut, Illinois, and New York.

Attorneys General Back States in Brief

But those are far from the only states that have expressed concern about prediction markets offering sports contracts without holding sports betting licenses in their jurisdictions. Last week, a group of 37 attorneys general from states across the country filed an amicus brief for a case in Massachusetts in which they asked a judge to uphold an earlier ruling that would prevent Kalshi to offer sports contracts in the state without a license from the Massachusetts Gaming Commission.

“If Congress meant to overturn the long tradition of state regulation over gambling that dates to the founding of the country, it needed to have said so clearly,” the attorneys general wrote in the brief. “As [New York Attorney General Letitia James] and the coalition argue, the CFTC cannot claim exclusive authority to regulate the multibillion-dollar gambling industry based on a provision of law that does not even mention gambling at all.”

It’s unclear how much support the CFTC and prediction markets have in Congress, either, particularly after recent allegations of insider trading on the platforms. In March, Sens. Adam Schiff (D-Calif,) and John Curtis (R-Utah) introduced the Prediction Markets Are Gaming Act, which would prevent prediction markets from offering contracts tied to sporting events anywhere in the nation.