This week, litigation surrounding prediction markets progressed in four different states, with Wisconsin requesting a preliminary injunction, Illinois seeking to pause the CFTC's federal challenge, Polymarket filing for a preliminary injunction in Rhode Island, and Kalshi transferring New Mexico's lawsuit to federal court.
These developments occur as courts nationwide deliberate whether the Commodity Exchange Act (CEA) supersedes state gambling laws concerning event contracts provided by prediction markets.
Wisconsin Requests Preliminary Injunction; Robinhood Advocates for Venue Change
Wisconsin has filed a motion for a preliminary injunction aimed at preventing Kalshi, Robinhood, Coinbase, and other related entities from offering sports event contracts within the state. The state's argument posits that these companies are engaging in illegal sports betting, thereby violating local gambling regulations. This filing disputes the industry's claims of preemption, asserting that the CEA does not override Wisconsin’s gambling laws, and maintains that sports event contracts do not meet the criteria for swaps under federal law.
Wisconsin emphasizes that the injunction is sought only if the court denies its existing motion to remand the case back to state court. Should the injunction be granted, it would bar these companies from providing sports event contracts in Wisconsin while the litigation is ongoing.
On the following day, Robinhood submitted a response backing its request to transfer the case to the Eastern District of Wisconsin, where the CFTC's lawsuit against the state is already in progress. Robinhood contended that both cases involve identical preemption issues and should be handled by the same court. The company also argued that the Eastern District is likely to reach a decision more swiftly due to the advanced stage of the federal government's case.
The filing indicates that all parties agree that both the state case and the CFTC's lawsuit should be addressed in the same district, making the venue dispute the central issue for the court.
Polymarket Seeks Preliminary Injunction in Rhode Island
In Rhode Island, Polymarket has joined Kalshi and the CFTC by filing a motion for a preliminary injunction to prevent the state from enforcing its gambling laws against the prediction market platform during the litigation process. Polymarket argues that federal law takes precedence over the state's enforcement actions, claiming that Rhode Island's lawsuit could lead to penalties, disrupt its federally authorized operations, and damage user trust.
The company has requested that the court maintain the current situation while the broader jurisdictional dispute is settled.
This motion follows last week's consolidation of Rhode Island's enforcement action against Kalshi and Polymarket with Kalshi's separate federal lawsuit challenging the state's regulation of event contracts.
Illinois Seeks Stay Pending Coinbase Decision
In Illinois, state officials have moved to stay the CFTC's lawsuit that challenges the state's restrictions on prediction markets. Illinois argues that the case presents the same legal questions currently being considered in Coinbase's lawsuit against state officials, including whether sports event contracts are classified as swaps under the CEA and if federal law supersedes state gambling regulations.
Illinois pointed out that the Coinbase case has already been thoroughly briefed and argued, making it more efficient to wait for that ruling before proceeding with the CFTC's challenge. The filing notes that courts across the nation are still divided on this matter, with multiple appeals pending in various federal circuits.
Additionally, Illinois has stated that it is not enforcing state laws against prediction markets while awaiting the outcome of the Coinbase preliminary injunction request.
Kalshi Transfers New Mexico Lawsuit to Federal Court
In a standard procedural move, Kalshi has transferred New Mexico's lawsuit to federal court.