CFTC Sues Wisconsin Over Prediction Market Regulation, Escalating Federal-State Conflict

The CFTC on Tuesday filed a lawsuit against the state of Wisconsin over the state's own lawsuit against top prediction market platforms, in the latest escalation of a jurisdictional standoff over the fate of the lucrative new sector. Wisconsin is the fifth state the CFTC has sued in recent weeks for attempting to regulate prediction markets via state gambling laws. Earlier this month, the federal regulator filed lawsuits against Illinois, Arizona, and Connecticut. On Friday, it sued New York, days after the state commenced legal action against crypto exchanges Coinbase and Gemini for their prediction market offerings. All states targeted by the CFTC thus far, including Wisconsin, feature Democratic governors and attorneys general. The CFTC is currently chaired by Donald Trump appointee Mike Selig. But the growing conflict between states and the Trump administration over prediction markets is by no means partisan. In the last year, numerous red states—including Tennessee, Utah, and Ohio—have expressed opposition to the federal government's aggressively pro-prediction market stance. The states, red and blue alike, contend prediction market wagers related to sports—and in some cases, politics and entertainment—are illegal gambling bets, lacking necessary registration with state gambling authorities. The prediction market platforms themselves have argued the wagers instead constitute event contracts exclusively under the federal purview of the CFTC. In recent months, the CFTC has full-throatedly backed the platforms' position. "States cannot circumvent the clear directive of Congress," CFTC chair Mike Selig said in a statement Tuesday. "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 speed of the CFTC's response to state-level legal action is accelerating; Wisconsin only filed lawsuits against top prediction market platforms on Friday. Those suits targeted Polymarket, Kalshi, Coinbase, Robinhood, and Crypto.com. The Wisconsin lawsuits focused on those platforms' sports-related prediction markets, which the states' attorney general argued are unregistered sports bets. Lawsuits filed by other states, however, including New York and Arizona, have been broader, targeting not just sports-related wagers but also those pertaining to elections and popular culture.