CFTC sues Wisconsin over prediction market dispute
The US Commodity Futures Trading Commission has filed a lawsuit against Wisconsin, seeking to block the state from shutting down prediction markets operated by federally regulated platforms.
The action followed civil suits filed by Wisconsin less than one week earlier against prediction market platforms Kalshi, Polymarket, Crypto.com, Robinhood, and Coinbase.
In those lawsuits, the state asserted felony violations of its gambling laws against the five Commodity Futures Trading Commission-regulated venues.
The Commission has argued that Congress assigned it exclusive jurisdiction over derivative products several decades ago, including event contracts traded on designated contract markets.
The complaint asked the federal court to declare Wisconsin’s gambling laws invalid as applied to such trading and to bar officials from enforcing them.
Chairman of the Commodity Futures Trading Commission, Michael Selig, said, “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 Wisconsin case was filed days after the Commission sued New York over a similar state-level action.
A federal court in Arizona recently issued a temporary restraining order blocking a state criminal prosecution against a Commodity Futures Trading Commission-regulated company, following a separate suit filed by the agency.
The Commission has also taken legal action against Connecticut, Illinois, and New York, and submitted amicus briefs to the US Court of Appeals for the Ninth Circuit and the Supreme Judicial Court of Massachusetts.
Charlotte Capewell brings her passion for storytelling and expertise in writing, researching, and the gambling industry to every article she writes. Her specialties include the US gambling industry, regulator legislation, igaming, and more.
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The Backstory
How the state-federal collision set up this fight
Wisconsin’s move against prediction markets set the stage for today’s courtroom standoff. Days before federal regulators intervened, the Wisconsin Department of Justice filed three civil lawsuits targeting a roster of event-contract venues, accusing them of enabling illegal sports betting in violation of state gambling laws. The cases name Kalshi, Robinhood, Coinbase, Polymarket and Crypto.com and contend their sports-linked event contracts are indistinguishable from wagers. In announcing the actions, state officials framed the products as sports betting in disguise and untethered to any Wisconsin license. The push followed months of scrutiny in other states and arrived as lawmakers and the state’s tribes negotiate a separate pact that could open the door to broader online gambling, a process officials said was not tied to the lawsuits. For details on the state’s allegations, see Wisconsin’s filing against multiple platforms for alleged illegal sports betting.
The Commodity Futures Trading Commission’s complaint targets that state effort head-on. The agency argues Congress granted it exclusive jurisdiction over derivatives decades ago, a remit it says encompasses event contracts when listed on federally regulated venues. In asking a federal court to preempt Wisconsin’s actions, the regulator is aiming to stop what it characterizes as state interference with the operation of national financial markets.
A widening crackdown beyond Wisconsin
Wisconsin’s suits did not materialize in isolation. State attorneys general and regulators from coast to coast have moved against event-based markets over the past year, with a particular focus on contracts tied to sports and politics. In New York, Attorney General Letitia James filed suits against Coinbase Financial Markets and Gemini Titan, asserting that their platforms amounted to illegal gambling without a license and skirted tax obligations that apply to licensed books. Coinbase, which launched a prediction market in partnership with Kalshi in January, countered that federally regulated exchanges fall under CFTC oversight. Read more on the New York actions against Coinbase and Gemini’s event markets.
Connecticut regulators also escalated. The state’s Department of Consumer Protection ordered several platforms to cease offering sports event contracts, calling them unlicensed online gambling and citing concerns about consumer safeguards. The department sent cease-and-desist letters to Kalshi, Robinhood and Crypto.com, warning that continued operations could trigger criminal charges. The agency emphasized the companies lacked state wagering licenses and raised issues such as age restrictions, insider trading risks and payout integrity. The crackdown is detailed in Connecticut’s order to stop sports contracts, with the underlying notices posted by the state for Kalshi, Robinhood and Crypto.com.
Other states and tribal regulators have taken similar tacks, arguing that if a contract resolves on the outcome of a game or an election it should be treated as a bet subject to state licensing. Those positions have multiplied into dozens of investigations and suits, creating a fragmented landscape that platforms must navigate one jurisdiction at a time.
Federal regulators tighten their case for primacy
The CFTC has not limited itself to asserting preemption. It has also tried to undercut a key talking point from states by emphasizing it can police the integrity of these markets. After a spate of high-profile incidents, the commission underscored its enforcement authority over fraud, manipulation and insider trading on event contracts offered by registered venues. The agency cited recent examples from Kalshi’s platform where traders allegedly influenced or had privileged knowledge of the underlying events and were sanctioned by the exchange, including monetary penalties and multi-year bans. The statement stressed that federal rules cover misappropriation of confidential information, wash trading and other abusive practices and that the commission will coordinate with exchanges and pursue cases when warranted. The agency’s position is summarized in its reaffirmation that it can police prediction markets after Kalshi flagged insider activity.
That message is central to the federal case against state-by-state crackdowns. If the CFTC can demonstrate it enforces market integrity on event contracts as it does on other derivatives, it strengthens the claim that these products belong under one national rule set rather than 50 different gambling codes.
Platforms mount their own legal counteroffensive
Predictive trading firms and their partners are not waiting for the CFTC to carry the entire fight. Coinbase filed suits against Michigan, Illinois and Connecticut, arguing that state efforts to regulate or shut down event-contract venues overstep legal authority reserved for federal regulators. The company said states have already moved against other players and are likely to do the same to Coinbase as it expands into the space. The litigation aligns Coinbase with Kalshi and Robinhood in seeking clarity from federal courts on preemption and the status of event contracts. Details of Coinbase’s challenge are laid out in its lawsuits against three states.
The multi-front legal strategy reflects rising stakes as more mainstream platforms experiment with event contracts. Success in court could open a path for broader listings tied to sports, elections and macro data, while adverse rulings could push the products back to niche or offshore venues and leave national players on the sidelines.
Why the outcome matters
The battle lines are clear: states view sports and many political markets as gambling that requires local licensure and taxation, while federal regulators and exchanges frame them as derivatives that fit squarely within the CFTC’s remit. Wisconsin’s suits and the CFTC’s rapid response distill that conflict. A ruling that favors federal preemption would curb states’ ability to police event contracts offered by registered markets and could accelerate institutional participation, product innovation and cross-state access. A ruling for Wisconsin would embolden attorneys general and regulators to keep shuttering markets they deem bets, forcing platforms to wall off users or pare back listings.
Consumers and market participants have a direct stake. Clear rules would determine whether Americans can trade on events under a unified federal framework with surveillance, disclosures and recourse, or face a patchwork where availability depends on the state line. The result will also shape how sports leagues, campaigns and media outlets interact with markets that can influence incentives and public perception. With lawsuits proliferating in New York, Connecticut, Arizona and beyond, Wisconsin’s clash with the CFTC is another test of who sets the rules for a fast-growing corner of finance that looks, to many state officials, a lot like gambling.
