The U.S. Commodity Futures Trading Commission (CFTC) has initiated legal proceedings against officials in Wisconsin to halt state lawsuits aimed at prediction market platforms such as Kalshi, Coinbase, and Polymarket.
Filed on Tuesday, the federal lawsuit seeks to prevent Wisconsin authorities from pursuing their recent legal actions, claiming these efforts disrupt the CFTC's regulatory authority over financial markets, as reported by the Milwaukee Journal Sentinel.
The CFTC argues that prediction markets fall under federal jurisdiction and should not be governed by state gambling regulations.
CFTC Chairman Michael Selig emphasized the importance of these lawsuits in preventing states from exceeding their legal boundaries. “States cannot circumvent the clear directive of Congress,” Selig stated. “Our message to Wisconsin mirrors that of New York, Arizona, and others: interference with federal law regulating financial markets will lead to legal action.”
This legal confrontation follows three lawsuits filed on April 23 by Wisconsin Attorney General Josh Kaul in Dane County Circuit Court. Kaul claimed that these companies were running illegal gambling operations by referring to sports betting products as “event contracts.” The cases were subsequently transferred to federal court.
Kaul defended the state's actions, asserting that simply rebranding gambling activities does not exempt firms from adhering to state laws. “Unlawful conduct doesn’t suddenly become permissible just because you call it something different,” he remarked. He also noted that a bipartisan coalition of state attorneys general has criticized the federal government’s position, labeling it an overreach that jeopardizes states' rights to safeguard their residents.
Wisconsin is pursuing a court decision to declare these activities illegal and to ban them within the state. However, legal representatives for Kalshi, Coinbase, and other involved companies argue that their operations are solely under federal jurisdiction.
This dispute is part of a wider legal initiative by the CFTC, which has also filed similar lawsuits against Arizona, Connecticut, Illinois, and New York regarding state-level efforts to regulate prediction markets.
Ryan VanGrack, Senior Legal Executive at Coinbase, remarked that the federal action marks a significant turning point. “By moving to block state encroachment, the Commission has sent an unmistakable signal: the era of jurisdictional ambiguity is over,” said VanGrack, who leads the legal division at Coinbase. “Federal law is not a suggestion—it is the exclusive authority governing these markets.”