The American Gaming Association (AGA) is attempting to intertwine itself in a legal dispute between the Commodity Futures Trading Commission (CFTC) and Wisconsin.
According to court documents filed in the U.S. District Court for the Eastern District of Wisconsin, the AGA filed a motion for leave to intervene on Tuesday to become a defendant in a lawsuit between the CFTC and Wisconsin over sports event contracts.
The AGA is requesting to join Wisconsin and State Attorney General Joshua Kaul as defendants in a federal lawsuit filed by the CFTC in late April. The CFTC is suing Wisconsin and Kaul after the state Department of Justice filed civil lawsuits in state court against several prediction markets for offering what it deems illegal sports wagering by delivering sports event contracts. The prediction markets that Wisconsin and state officials sued are:
- Coinbase
- Crypto.com
- Kalshi
- Polymarket
- Robinhood
Wisconsin sued the group of event contract providers seeking preliminary and permanent injunctions to prevent the platforms from offering sports event contracts in the state.
CFTC responds to lawsuit filed by Wisconsin
The CFTC responded to Wisconsin’s legal proceedings with a suit of its own, requesting a District Court to declare that the state’s lawsuits against the prediction markets are unconstitutional and violate the Supremacy Clause. The CFTC is requesting a permanent injunction against Kaul and other state officials, but the request could now include the AGA amid the association’s motion to intervene in the legal dispute over sports event contracts.
The CFTC is taking legal action against Wisconsin, claiming it has regulatory authority over prediction markets and sports event contracts. The CFTC’s argument is being refuted by the AGA in its motion to intervene, as it considers event contracts illegal gambling.
“The United States of America and the Commodity Futures Trading Commission ask this court to grant the CFTC sweeping and novel authority that Congress never authorized: the right to serve as the nation’s sports betting regulator,” reads the motion to intervene.
“For the American Gaming Association and its members—which include commercial and tribal casino operators, suppliers, and sports betting operators across the country—that issue is not an abstract question of regulatory jurisdiction. It directly threatens their core economic interests.”
In its motion to intervene, the AGA also details the potential impact of sports event contract regulation by the CFTC without the issuing of state gaming licenses.
“AGA members thus have a direct stake in the outcome of this litigation. They compete in gaming markets that are heavily regulated and capital intensive. To participate in those markets, AGA members obtain licenses, comply with comprehensive regulatory obligations, submit to ongoing government oversight, and pay substantial taxes and fees,” continues the motion. “In practical terms, a ruling for the federal government would confer a significant competitive advantage on unlicensed prediction markets while disadvantaging the businesses that have complied with the existing regulatory system.”
The AGA’s motion has received authorization from Wisconsin officials. Meanwhile, the CFTC opposes the inclusion of the trade association in the ongoing legal dispute.
The AGA takes a page out of the CFTC’s book
The AGA filed a request to intervene in the legal proceedings between Wisconsin and the CFTC after the CFTC used a similar tactic to join two pre-existing lawsuits.
In February, the CFTC filed an amicus brief in a court case involving Crypto.com. The amicus brief was filed in the U.S. Court of Appeals for the Ninth Circuit. The CFTC filed the friend-of-the-court brief to defend its exclusive jurisdiction over prediction markets.
The CFTC also filed an amicus brief in the Massachusetts Supreme Judicial Court. The brief reaffirmed the CFTC’s claim that it has exclusive jurisdiction over prediction markets.
“Some states continue to pursue ever-escalating, illegal enforcement actions against CFTC-regulated exchanges, despite rulings from multiple courts halting those efforts,” said CFTC Chairman Michael Selig in a press release announcing the court filing in Massachusetts.
“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 agency jumped into the legal proceedings after a judge upheld a ruling that granted Massachusetts a preliminary injunction against Kalshi. A group of government officials, including New York AG Letitia James, filed an amicus brief in support of the judge’s ruling.
