The Commodity Futures Trading Commission (CFTC) was quick on the draw in Wisconsin, filing a federal lawsuit against the state Tuesday days after the state took five prediction market platforms to court.
Wisconsin Attorney General Josh Kaul and the state Department of Justice filed civil suits in Dane County state court last Thursday against each of the following companies, alleging that the sports event contracts offered by each firm are equivalent to illegal sports wagering:
- Coinbase
- Crypto.com
- Kalshi
- Polymarket
- Robinhood
The state is seeking preliminary and permanent injunctions to stop the firms from offering sports trading in Wisconsin.
‘Aggressive’ Wisconsin likely to cause irreparable harm, says CFTC
In a statement issued Tuesday, the CFTC said that it filed its U.S. District Court for the Eastern District of Wisconsin complaint “in response” to those state lawsuits.
The federal regulator is asking the court to declare that Wisconsin’s actions violate the Supremacy Clause and are unconstitutional and invalid. It also seeks a permanent injunction against defendants Kaul, the Wisconsin Department of Administration’s Division of Gaming, and Wisconsin Gov. Tony Evers.
“Wisconsin’s attempt to criminalize and shut down federally regulated markets intrudes on the exclusive federal scheme Congress designed to oversee national swaps markets,” states the CFTC filing. “… Event contracts do not fall under the definition of ‘bets’ as defined in Wis. Stat. § 945.01(1). Therefore, offering event contracts for trade to residents of Wisconsin cannot violate Wis. Stat. § 945.03 …
“Unless restrained and enjoined by the Court, defendants are likely to continue their attempts to subvert federal law and the exclusive jurisdiction to regulate event contract swaps conferred on the CFTC by Congress. Defendants’ aggressive enforcement of their preempted state laws causes irreparable harm to the federal plaintiffs because it is disrupting the operation of federally regulated markets and impairing the CFTC’s ability to apply and enforce its own regulations and the federal CEA.
“Absent an injunction, the United States and the CFTC will suffer irreparable harm.”
Different state and court, same message from CFTC
Those comments echo the statements that the commission has made repeatedly in various public settings and in several other courts since Chairman Michael Selig took up his position in January.
In an escalating battle over federal vs. state jurisdiction of sports event contracts, Wisconsin is the fifth state that the CFTC has sued in relation to prediction markets in the space of a month. The latest filing comes just days after the commission sued New York in what was also a responsive move after New York filed its own lawsuit against Coinbase and another prediction market platform, Gemini.
The commission also filed federal lawsuits against three other states that have taken various measures to try to force out prediction market platforms:
- Arizona
- Connecticut
- Illinois
In Arizona, state officials filed the first criminal charges in court against a prediction market platform when they sued Kalshi, but a federal court issued a temporary restraining order that blocked the state from doing so in the short term.
All five of the states sued by the CFTC under President Donald Trump’s administration — as well as Massachusetts, where the CFTC filed an amicus brief last week — have Democratic governors.
“States cannot circumvent the clear directive of Congress,” said Selig in the CFTC’s Tuesday press release. “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.”
Wisconsin looks ahead to statewide online sports betting
Wisconsin has become a prediction markets battleground at the same time as the state is preparing to launch a regulated online sports betting market.
Earlier in April, Gov. Evers signed into law a bill that legalizes statewide sports wagering under a “hub-and-spoke” tribal gaming model that will allow the state’s federally recognized tribes to offer state-wide wagering under the Indian Gaming Regulatory Act (IGRA), pending the amendment and ratification of tribal gaming compacts.
