CFTC loses Wisconsin bid to shield prediction markets

A federal judge has rejected the CFTC’s request to stop Wisconsin from enforcing state gambling laws against federally regulated prediction market platforms.

Wisconsin court rejects CFTC injunction

Judge William Griesbach of the U.S. District Court for the Eastern District of Wisconsin denied the Commodity Futures Trading Commission’s attempt to block Wisconsin from applying its gambling laws to prediction market operators.

The CFTC filed the federal case in April after Wisconsin sued Kalshi, Polymarket, Crypto.com, Robinhood, and Coinbase. Wisconsin alleges that sports event contracts offered through these platforms amount to unlicensed sports betting.

Griesbach found that the CFTC had not shown that it was likely to succeed on the merits, face irreparable harm, or benefit from the balance of equities required for a preliminary injunction.

The court also rejected requests from Kalshi and Crypto.com to intervene and seek preliminary relief in the federal dispute.

The CFTC argued that sports event contracts qualify as swaps under the Commodity Exchange Act and therefore fall under its exclusive federal authority. However, Griesbach concluded that the agency had not shown that sports contracts meet the law’s definition of swaps.

That finding alone was enough to deny the injunction, according to the court’s reasoning.

State gambling laws may cover sports contracts

Griesbach also rejected the CFTC’s argument that the Commodity Exchange Act prevents Wisconsin from applying its gambling statutes to CFTC-regulated platforms.

“Wisconsin’s gambling statutes do not conflict with federal commodities regulations and are not preempted by them,” the judge wrote.

The decision suggests that federal registration does not automatically shield a platform from state gambling enforcement when its contracts are tied to sporting outcomes.

Wisconsin Attorney General Josh Kaul has described these contracts as sports bets presented as financial products.

“Thinly disguising unlawful conduct doesn’t make it lawful,” Kaul said when the state announced its lawsuits in April. “These companies’ alleged facilitation of sports betting in Wisconsin should be shut down.”

Legal analyst Daniel Wallach said the five state cases are likely to return to Wisconsin courts because the federal statute does not completely preempt state law. State judges could then consider injunctions preventing the platforms from offering sports contracts in Wisconsin.

CFTC faces pressure from 44 states

The ruling adds to a wider challenge to the CFTC’s attempt to establish national control over prediction markets.

Attorneys general from 44 states have urged the regulator to withdraw and rewrite proposed amendments to Rule 40.11. Their letter argues that the framework exceeds the CFTC’s authority under the Commodity Exchange Act and intrudes into gambling oversight traditionally handled by states.

Ohio Attorney General Andy Wilson led the coalition, which submitted its objections as the public comment period closed. The states argued that Congress had not clearly authorized the CFTC to assume control over sports betting markets.

“States have long regulated gambling—including sports bets. The federal government has not,” the letter stated, according to the filing covered by crypto.news.

The dispute matters for US users because platform access may increasingly depend on where they live. If state laws apply alongside federal commodities rules, Kalshi, Polymarket, and similar operators could face different licensing requirements or restrictions across the country.

Conflicting rulings leave prediction markets uncertain

Wisconsin’s decision contrasts with a ruling issued in Minnesota earlier this week.

U.S. District Judge Katherine Menendez temporarily blocked Minnesota’s new prediction market ban after finding that the CFTC, Kalshi, and Polymarket were likely to succeed in their federal preemption challenge. The injunction allows the platforms to continue operating in Minnesota while the case proceeds, according to the Associated Press.

The different outcomes leave the industry without a consistent national standard. Courts in Wisconsin and New York have favored state authority, while Minnesota’s ruling supports the CFTC’s claim that some event contracts fall under exclusive federal oversight.

A CFTC spokesperson said the agency was disappointed with the Wisconsin decision and would appeal. The next stage could determine whether Wisconsin’s lawsuits proceed in state court and whether the affected platforms must stop offering sports contracts there.