U.S. Sues to Block Wisconsin from Enforcing Gambling Laws Against Prediction Markets

The United States and the CFTC sued Wisconsin to block the enforcement of the state's gambling laws against five CFTC-regulated prediction market platforms.

Before the U.S. District Court for the Eastern District of Wisconsin, the federal government requested injunctive and declaratory relief from civil enforcement actions brought by Wisconsin's Attorney General against Kalshi, Coinbase, Robinhood, Polymarket, and Crypto.com. Wisconsin alleged each platform had facilitated illegal sports betting in violation of Wisconsin gambling statutes. 

In its Complaint, the federal government argued that Wisconsin law is preempted on three grounds, including (i) that the Commodity Exchange Act expressly grants the CFTC exclusive jurisdiction over swaps and futures traded on designated contract markets ("DCMs"); (ii) that Congress reinforced that preemption through the Futures Trading Act of 1978, the Commodity Futures Modernization Act of 2000, and the Dodd-Frank Wall Street Reform and Consumer Protection Act which stripped states of any remaining authority over swap transactions; and (iii) that CFTC Rule 38.151(b) ("Access Requirements") requires DCMs to provide impartial access to all eligible participants nationwide, making compliance with a state-by-state ban impossible. The federal government underscored that event contracts on CFTC-regulated DCMs qualify as "swaps" under CEA Section 1a(47) - not "bets" under Wisconsin law. The federal government highlighted that the Third Circuit confirmed this in KalshiEX, LLC v. Flaherty, holding that sports-related event contracts traded on a CFTC-licensed DCM fall within CFTC exclusive jurisdiction.

The federal government is seeking:

• a declaratory judgment that Wisconsin gambling and betting statutes are preempted by the CEA as applied to transactions on CFTC-designated DCMs, whether offered directly or through futures commission merchants ("FCMs");
• a permanent injunction barring Wisconsin, Governor Anthony S. Evers, Attorney General Kaul, the Wisconsin Department of Administration Division of Gaming, and Administrator John Dillett from enforcing state gambling laws against CFTC-designated DCMs and FCMs; and
• costs, fees, and any other relief the court deems just and proper.