The Commodity Futures Trading Commission (CFTC) filed a lawsuit against the state of Wisconsin this week, seeking to block enforcement actions against federally regulated prediction market platforms. The move directly challenges Wisconsin’s recent civil cases against Kalshi and Coinbase, which alleged that event contracts constitute gambling under state law.
Federal vs. State Legal Classification
CFTC Chairman Mike Selig argued that event-based contracts qualify as swaps traded on designated contract markets, placing them under federal oversight rather than state gambling statutes. Wisconsin officials, however, contend that users pay for positions and receive fixed payouts, a structure that mirrors wagering. This fundamental disagreement over legal classification drives the ongoing legal dispute.
The Wisconsin case follows similar CFTC actions against New York, Arizona, and others. A federal court in Arizona recently issued a temporary restraining order against state prosecution of a regulated company. The CFTC said it seeks a permanent injunction in Wisconsin to prevent further interference.
Defendants Include Top State Officials
The lawsuit names Wisconsin Governor Tony Evers, Attorney General Josh Kaul, and state gaming officials as defendants. The CFTC argues that states cannot override congressional authority governing financial markets. If each state applies different rules, the national derivatives market would face fragmentation.
The outcome of this case could set a precedent for how prediction markets operate across jurisdictions. Platforms like Kalshi and Coinbase have insisted their products comply with federal regulations. The CFTC aims to resolve the jurisdiction conflict once and for all, avoiding a patchwork of state-level enforcement that would burden the industry.