CFTC Sues Wisconsin in Response to State’s Prediction Market Lawsuits

• The Commodity Futures Trading Commission has sued Wisconsin to reaffirm its jurisdiction over prediction markets
• The lawsuit comes days after the Commodity Futures Trading Commission also sued New York
• Congress assigned exclusive jurisdiction over the regulation of prediction markets to the CFTC decades ago, chairman notes

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The Commodity Futures Trading Commission has filed a lawsuit against Wisconsin to reaffirm its jurisdiction over prediction markets, the legal action coming less than a week after the state levied its own lawsuits against several prediction market companies

The Commodity Futures Trading Commission (CFTC) Chairman Michael S. Selig said the message is the same in Wisconsin as in other states where the CFTC has taken action.

“States cannot circumvent the clear directive of Congress,” Selig said in a released statement. “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.”

Direct Response to Wisconsin Lawsuits

The CFTC’s legal action taken against the state is in direct response to the Wisconsin Department of Justice’s (DOJ) own lawsuits against Kalshi, Robinhood, Coinbase, Polymarket, Crypto.com, and their affiliates, alleging engagement in illegal sports betting operations in the Badger State.

According to the CFTC, Congress assigned “exclusive jurisdiction over the regulation of various derivative products to the CFTC decades ago,” including event contracts traded on designated contract markets.

The Wisconsin DOJ last week filed lawsuits against the prediction market companies in the State of Wisconsin Circuit Court Dane County to halt “alleged facilitation of illegal sports betting, a form of unlawful commercial gambling, in Wisconsin,” according to a department release.

According to the filed lawsuits, Wisconsin has banned most forms of betting in the state outside of tribal gaming operations. The prediction market companies facilitate sports betting through their event contract trading platforms, DOJ counsel wrote in its lawsuit, which pay out as ordinary bets based on the odds of sports-related outcomes.

The lawsuits allege the companies collect a fee for every bet made on the platform, which results in generated revenue from Wisconsinites by violating the state’s gambling laws.

By marking money from these sports event contracts, DOJ counsel alleges the companies are engaging in unlawful gambling activity in the state.

Busy Legal Week for CFTC

The new CFTC lawsuit comes just several days after it filed a lawsuit against New York on similar grounds.

The CFTC this week announced it filed a lawsuit in the U.S. District Court for the Southern District of New York in response to the state’s recent attempts to enforce state laws to prohibit sports event contracts from being traded.

“Some states continue to pursue ever-escalating, illegal enforcement actions against CFTC-regulated exchanges, despite rulings from multiple courts halting those efforts,” Selig said in a press release. “Congress has entrusted the CFTC with the sole authority to regulate commodity derivatives markets, including prediction markets. To any state that seeks to nullify federal law and seize authority over these markets, I say again: we will see you in court.”

The CFTC’s decision to file a lawsuit in New York stems from the New York State Gaming Commission sending several cease-and-desist orders to prediction market operators over the past year and New York Attorney General Letitia James recently suing both Coinbase and Gemini for offering sports event contracts in the state.

The CFTC also filed an amicus brief this week in Massachusetts’ ongoing lawsuit against Kalshi. The brief outlines the history and structure of the Commodity Exchange Act (CEA) and describes how the act designed by Congress preempts state laws as applied to CFTC-regulated markets.

The CFTC previously filed an amicus brief before the U.S. Court of Appeals for the Ninth Circuit, arguing that state laws are preempted by the CEA.