CFTC files lawsuit blocking Wisconsin action against prediction markets

The U.S. Commodity Futures Trading Commission has sued Wisconsin, escalating its legal push to block state action against federally regulated prediction market platforms.

According to a statement from the Commodity Futures Trading Commission, the lawsuit responds directly to Wisconsin’s recent complaints against Kalshi, Polymarket, Crypto.com, Robinhood, and Coinbase, all of which operate prediction markets under federal oversight.

“States cannot circumvent the clear directive of Congress,” CFTC Chairman Michael Selig said, adding that similar warnings have been issued to New York, Arizona, and other states pursuing comparable enforcement. 

“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.”

Filed alongside the Civil Division of the U.S. Department of Justice in a Wisconsin federal court, the complaint argues that event-based contracts listed on registered exchanges fall under the agency’s “exclusive jurisdiction” as designated contract markets. The filing states that Wisconsin’s attempt to apply gambling laws “intrudes on the exclusive federal scheme Congress designed to oversee national swaps markets.”

The regulator has asked the court to declare that state gambling statutes do not apply to CFTC-regulated platforms and to issue a permanent injunction preventing Wisconsin from pursuing enforcement actions.

State lawsuits collide with federal oversight claims

Wisconsin’s legal action, filed days earlier, targets the same set of platforms over contracts tied to real-world outcomes, including sports events. In complaints reviewed from Dane County filings, state prosecutors argue that users place money on event outcomes and receive fixed payouts, a structure Attorney General Josh Kaul described as falling within the state’s definition of betting. 

“Thinly disguising unlawful conduct doesn’t make it lawful,” Kaul said in the earlier case.

State filings also cited marketing language from platforms, including descriptions framing their services as nationwide betting systems, while pointing to transaction fees collected on trades as comparable to casino revenue models.

Federal regulators and industry participants have rejected that framing. The CFTC’s complaint reiterates that such contracts qualify as swaps under federal commodity law, a position that has also been supported in prior litigation, including a ruling from the United States Court of Appeals for the Third Circuit that treated the regulator’s decision not to block certain contracts as effectively resolving jurisdictional questions.

Wisconsin’s case adds to a growing list of state-level actions. According to prior filings, New York Attorney General Letitia James has sued Coinbase Financial Markets and Gemini Titan over similar products, while authorities in Arizona, Connecticut, Illinois, Massachusetts, and Nevada have issued enforcement actions ranging from lawsuits to cease-and-desist orders.

The CFTC’s suit against Wisconsin becomes its fifth case against a U.S. state this month, following earlier actions against New York, Arizona, Connecticut, and Illinois, as the agency continues to argue that regulation of prediction markets rests solely at the federal level.