CFTC sues Wisconsin over prediction markets

The Commodity Futures Trading Commission sued Wisconsin on April 28, saying the state cannot use gambling law to shut down federally regulated prediction markets. (cftc.gov) (reuters.com) Wisconsin Attorney General Josh Kaul had filed suits less than a week earlier against Kalshi, Polymarket, Crypto.com, Robinhood and Coinbase. The state said their sports-related event contracts amount to illegal commercial gambling under Wisconsin law. (cftc.gov) (theblock.co) Prediction markets let users buy contracts tied to real-world outcomes, with prices moving like odds. The CFTC treats many of those contracts as derivatives, the same broad category that includes futures and swaps. (natlawreview.com) (cftc.gov) Wisconsin’s complaints asked courts for preliminary and permanent injunctions to stop the five platforms from offering sports event contracts to customers in the state. The filings said the products function like bets on moneylines, point spreads and totals. (theblock.co) The federal regulator says Congress gave it exclusive authority over these markets decades ago, including event contracts traded on designated contract markets. CFTC Chair Michael Selig said, “States cannot circumvent the clear directive of Congress.” (cftc.gov) That turns the case into a jurisdiction fight as much as a gambling fight. Wisconsin says the contracts are unlawful sports wagering sold to residents in the state, while the CFTC says federal derivatives law overrides state restrictions. (reuters.com) (theblock.co) Wisconsin is the fifth state sued by the CFTC in April after Arizona, Connecticut, Illinois and New York. The agency said an Arizona federal court recently issued a temporary restraining order blocking a state criminal prosecution against a CFTC-regulated company. (cftc.gov) (thehill.com) The Wisconsin complaints also give a sense of what states are targeting. One filing said residents could trade contracts on NCAA tournament outcomes, including Final Four matchups, point spreads and which team would score 10 points first. (theblock.co) The outcome will help decide whether prediction platforms can keep listing sports and other event contracts nationwide under one federal rulebook, or face a state-by-state patchwork. For now, the CFTC is telling states that if they sue first, it plans to answer in federal court. (cftc.gov) (coindesk.com)