The Commodity Futures Trading Commission (CFTC) continues to fight back in its escalating legal battle with state governments over the future of prediction markets by announcing its plans to sue Wisconsin.
Last week, Wisconsin had filed civil lawsuits against Coinbase, Crypto.com, Kalshi, Polymarket and Robinhood, alleging their sports-related event contracts violate state gambling laws. The state is seeking court orders to block the platforms from operating within its borders.
The CFTC filed its own lawsuit in the U.S. District Court for the Eastern District of Wisconsin, seeking to halt Wisconsin’s enforcement actions and arguing they are preempted by federal law under the Supremacy Clause.
Exclusive authority claimed by CFTC
Setting out its legal case, the federally-backed CFTC argues Wisconsin’s legal actions conflict with federal law and interfere with markets overseen by the commission, which it argues has exclusive oversight.
In a written filing, it states: ““Wisconsin’s attempt to criminalize and shut down federally regulated markets intrudes on the exclusive federal scheme Congress designed to oversee national swaps markets,”
Furthermore, it argues the action will have a damaging impact on its future ability to regulate prediction markets on a national level: “Absent an injunction, the United States and the CFTC will suffer irreparable harm.”
In a statement, CFTC chair Michael 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.”
Last week, the commission announced it was counter-suing New York over illegal gambling charges brought against prediction market platforms by its Attorney General Letitia James.
James filed lawsuits in Manhattan against Coinbase and Gemini, alleging their prediction market products violate New York gambling laws, and seeks to block the platforms unless they obtain licenses from the state gaming regulator, arguing the companies offered event-based contracts on sports, elections and entertainment without authorization and allowed users under the legal betting age of 21.
James contends the products constitute gambling because users wager on outcomes beyond their control, and is seeking financial penalties, restitution and restrictions on marketing and access, amounting to billions of dollars.
Wisconsin AG criticizes federal authority
In a statement released last week, Wisconsin Attorney General Josh Kaul pointed to the opposition to prediction markets across both aisles of the House and the Senate.
He said: “Unlawful conduct doesn’t suddenly become permissible just because you call it something different. Tellingly, in other cases, a bipartisan group of AGs has lined up in opposition to the authority the federal government is asserting here.”
In the complaint, the Wisconsin Department of Justice alleges several companies violated Wisconsin law by offering sports betting disguised as “event contracts,” allowing users to wager on game outcomes while the companies collect fees on each transaction. The state argues the activity amounts to illegal gambling and a public nuisance, and is seeking court orders to block the offerings and stop the companies from providing such products within Wisconsin.
Native American tribe urged Kaul to take action
Gambling plays a central role in Wisconsin’s economy and in the finances of Native American tribes, which operate most of the state’s legal gaming under compacts with the state.
For tribes, casino revenue helps fund government services, including health care, education and housing, while also supporting jobs and local development. The state, in turn, receives revenue-sharing payments tied to those operations, making gaming a significant and tightly regulated part of Wisconsin’s broader fiscal structure.
Prediction markets are viewed by some with suspicion because they can resemble sports betting without falling under the same regulatory framework or revenue-sharing agreements. Critics argue that if companies offer event-based contracts tied to sports outcomes outside the tribal system, it could divert customers and revenue away from casinos while bypassing state oversight.
That dynamic, they say, risks undermining longstanding tribal-state agreements and the funding streams that depend on them.
A prominent community voice against prediction markets in the state comes from Oneida Nation Chairman Tehassi Hill. He said: “They’re just siphoning money out of the state of Wisconsin,” adding that tribes had sent a letter to AG Kaul last year to tackle the issue.
“With these prediction markets, there’s no way to be assured there’s the sort of protection and making sure there’s processes in place to address problem gambling.”
It represents yet another legal battle for the CFTC, as it attempts to exert federal authority over such a contentious issue.
