CFTC Sues Wisconsin, Challenging State Effort to Ban Prediction Markets
The U.S. Commodity Futures Trading Commission filed a federal lawsuit Tuesday against the State of Wisconsin, escalating a growing clash over whether prediction market “event contracts” fall under federal derivatives regulation or state gambling law.
The suit, filed April 28, 2026, seeks to block Wisconsin’s attempt to shut down platforms the CFTC says operate under its oversight, including Kalshi and Polymarket.
Wisconsin Attorney General Josh Kaul set the dispute in motion on April 23, filing three civil actions in Dane County Circuit Court against Kalshi, Polymarket, Foris Dax Markets/Crypto.com and affiliated entities, naming Robinhood and Coinbase in connection with the businesses. The complaints argue the companies’ sports-outcome contracts amount to illegal sports wagering under Wisconsin law, citing Wis. Stat. 945.03(1m), which treats the conduct as a Class I felony.
"Thinly disguising unlawful conduct doesn't make it lawful," Kaul said in announcing the cases. "These companies' alleged facilitation of sports betting in Wisconsin should be shut down."
CFTC Chairman Michael Selig responded that state enforcement cannot displace federal authority. "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," he said.
At issue is the legal status of event contracts—financial instruments that pay out based on real-world outcomes such as sports results or elections. Kalshi, a CFTC-registered designated contract market, treats the products as federally authorized swaps subject to CFTC consumer-protection rules. Wisconsin characterizes them as bookmaking.
The CFTC argues Congress granted it exclusive jurisdiction over derivatives traded on registered exchanges to prevent a state-by-state regulatory patchwork. The agency says Wisconsin’s lawsuits attempt to impose the kind of fragmented regime Congress sought to avoid when it established the CFTC framework decades ago.
Wisconsin’s filings also point to the business scale involved. According to court documents, Kalshi earns more than $1 billion annually from sports contracts, which account for about 90% of its revenue.
The Wisconsin case is the latest in a wave of federal litigation. The CFTC has now sued five states in April 2026, after bringing similar actions against Arizona, Connecticut, Illinois, and New York. In Arizona, the agency obtained a temporary restraining order. The platforms and the CFTC have also cited Third Circuit precedent they say supports federal preemption.
Industry legal teams have pushed back on state enforcement. Coinbase Chief Legal Officer Paul Grewal, along with representatives from Robinhood and Kalshi, has argued that CFTC registration and federal supervision make state gambling statutes inapplicable to these markets. Polymarket, which incorporates crypto elements and serves U.S. users, faces added scrutiny over its structure, though the CFTC has also moved to protect access from state interference.
Wisconsin allows sports betting only through limited tribal gaming compacts, leaving most online sports wagering illegal. That backdrop underpins Kaul’s position that sports event contracts are unlawful in the state regardless of federal registration.
Legal analysts widely expect the dispute to reach the U.S. Supreme Court. A definitive ruling would determine whether sports event contracts fall under the CFTC’s authority or remain within state gambling jurisdiction, an issue regulators, platforms, and state governments continue to answer differently. In the meantime, users in states with active litigation may face access restrictions even as CFTC-regulated platforms continue to operate under federal authority.
