CFTC Takes Wisconsin to Court in Escalating Fight Over Prediction Market Authority

The Commodity Futures Trading Commission (CFTC) filed suit against the state of Wisconsin on April 28. It's the latest move in what has become a rapidly expanding legal battle over who holds the authority to govern the best prediction markets in the US.

The action came less than a week after Wisconsin initiated its own civil suits against five companies operating in the prediction market space. The state sued Kalshi, Polymarket, Crypto.com, Robinhood, and Coinbase for alleged felony violations of state law against each.

The CFTC's position rests on federal statute. It argues that Congress, decades ago, granted it sole regulatory authority over derivatives products, including event contracts traded on designated contract markets. In the agency's view, state gambling laws simply cannot override that congressional mandate.

CFTC Chairman Michael Selig was blunt in his statement, warning Wisconsin, as he had previously warned New York, Arizona and others, that federal interference would be met with litigation.

The case in Wisconsin is just the latest round in the legal clash between the state and federal branches. CFTC has active lawsuits against Connecticut, Illinois and New York, and has submitted amicus briefs in proceedings before the Ninth Circuit and the Massachusetts Supreme Judicial Court. A federal court in Arizona recently granted a temporary restraining order blocking state prosecutors from pursuing criminal charges against a CFTC-regulated prediction market company, a development the agency cited as validation of its jurisdictional stance.

Polymarket Pushes to Bring Its Main Exchange Back to American Users

That regulatory contest is unfolding against a backdrop of significant industry activity. Polymarket, one of the five companies named in Wisconsin's lawsuit, is simultaneously pursuing a very different kind of engagement with federal regulators.

According to sources cited by Bloomberg, the company has held discussions with CFTC officials in recent weeks about lifting the ban on US users from its primary international exchange. That restriction has been in place since Polymarket settled with the CFTC in 2022 and paid a $1.4 million penalty for operating as an unregistered derivatives facility.

The CFTC cleared a separate US-only Polymarket platform last November after the company acquired a registered exchange, though that site has yet to fully launch. The main international exchange, which settles trades in USDC on the Polygon network, currently generates far more volume and offers a broader range of contracts than the domestic alternative.

Bringing it back to American users would represent a substantial expansion. However, it's unclear how that exchange might impact the US-only platform's operations.

The CFTC would need to hold a vote before lifting Polymarket's US block, a process made somewhat simpler by the fact that four of the five commission seats are currently vacant, leaving Chairman Selig as the sole sitting commissioner. He has not specified when a decision might be made.