CFTC Sues Wisconsin in Latest Prediction Markets Skirmish
The CFTC (Commodity Futures Trading Commission) is suing Wisconsin in its latest battle over U.S. regulation of prediction markets.
The Badger State had filed now-familiar cease-and-desist letters against a handful of prediction market operators. The CFTC countered with a lawsuit telling Wisconsin to leave well alone.
The key dispute is in how prediction markets are regulated in the U.S. Currently, predictions are regulated by the federal government as financial trading platforms. However, Wisconsin is among several states that argue it amounts to sports betting. Sports leagues and players' unions are also pushing for more control of prediction market platforms.
At a Glance:
- CFTC sues Wisconsin for attempting to regulate predictions
- WI joins multiple U.S. states fighting CFTC lawsuits
- Wisconsin had issued cease-and-desist letters to five operators
- State maintains prediction markets fall under sports betting rules
- CFTC countered, saying they have federal jurisdiction
Prediction markets ‘should be shut down,’ says Attorney General
It’s only been a week since the Wisconsin Department of Justice issued civil suits against five prediction market companies. All five, including Kalshi, operate in the United States.
“These companies’ alleged facilitation of sports betting in Wisconsin should be shut down,” said the attorney general.
In response, the CFTC swiftly filed a suit against the state. In a press statement released on 28 April, CFTC chairman Michael S. Selig said, “States cannot circumvent the clear directive of Congress. 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.”
A federal judge in Arizona recently blocked the state's criminal case against Kalshi.
Meanwhile, a new Ohio bill aims to regulate prediction markets at the state level rather than pursuing a full ban, as seen in other states.
Five prediction platforms targeted by Wisconsin:
- Kalshi
- Polymarket
- Coinbase
- Crypto.com
- Robinhood
Wisconsin joins states in CFTC war
Wisconsin is just the latest state to feel the wrath of the CFTC. Last week, the CFTC sued New York for trying to apply state gambling law to prediction platforms.
New York has a relatively fledgling regulated sports betting industry and wants to protect it from federal oversight. Additionally, New York and other states with legalized sports betting argue they miss out on taxes from sites like Polymarket.
Supreme Court may hold the key to unpicking CFTC deadlock
The tit-for-tat battles between regulated states and the CFTC could lead to Supreme Court intervention. The U.S. Court of Appeals for the Third Circuit has barred New Jersey from restricting Kalshi under its own laws.
The Supreme Court could still end up hearing the case for and against state intervention.
Some prediction markets are even offering ‘Yes’/’No’ odds on whether the SCOTUS will hear the case. Should appeal courts continue to be split, expect a ‘Yes’ on that market by 2027.
