In a recent legal maneuver on Tuesday, the CFTC filed a lawsuit against Wisconsin following its own litigation targeting prominent prediction market platforms. This marks another step in an ongoing jurisdictional dispute over the burgeoning sector’s regulation.
Wisconsin joins Illinois, Arizona, Connecticut, and New York as states confronted by federal lawsuits for attempting to regulate prediction markets through state gambling laws. Earlier this month, the CFTC initiated legal actions against Illinois, Arizona, and Connecticut, while on Friday it targeted New York following its lawsuit involving crypto exchanges Coinbase and Gemini.
The states involved in these suits, including Wisconsin, are led by Democratic governors and attorneys general. The current CFTC chair, Mike Selig, was appointed by Donald Trump. However, the conflict over prediction markets transcends partisan lines. Over the past year, various red states such as Tennessee, Utah, and Ohio have also opposed the federal government’s supportive stance towards prediction markets.
These states argue that wagers on sports, politics, and entertainment through prediction markets constitute illegal gambling without proper registration with state authorities. Conversely, the platforms assert these wagers are event contracts under the CFTC’s jurisdiction. Recently, the CFTC has robustly supported this interpretation.
“States cannot bypass Congress’s clear directives,” stated CFTC chair Mike Selig in a Tuesday announcement. “We’ve communicated to Wisconsin and others like New York and Arizona: interference with federal financial market regulation will lead to legal action.”
The CFTC’s swift reaction to state lawsuits is becoming more pronounced; Wisconsin initiated its own legal actions against leading prediction market platforms on Friday, naming Polymarket, Kalshi, Coinbase, Robinhood, and Crypto.com.
Wisconsin’s suits concentrated on sports-related markets deemed unregistered sports bets. Other states’ legal actions, like those in New York and Arizona, have been broader, encompassing wagers related to elections and popular culture.