CFTC sues Wisconsin officials over prediction market bans

The Commodity Futures Trading Commission filed suit on Tuesday in the U.S. District Court for the Eastern District of Wisconsin against Gov. Tony Evers, Attorney General Joshua Kaul and John Dillett, administrator of the state Division of Gaming. The agency asked the court to declare federal law preempts Wisconsin’s restrictions on prediction markets and to stop state enforcement actions related to those markets.

In its complaint the CFTC argued it has exclusive jurisdiction over event-contract swaps listed on exchanges regulated by the agency. The filing seeks injunctive and declaratory relief, asking the court to rule that state gambling and betting bans are preempted as applied to event-contract swaps traded on CFTC-regulated designated contract markets.

Wisconsin earlier sued several trading platforms in state court, naming Coinbase, Robinhood, Crypto.com, Polymarket and Kalshi. The state asked a court to abate what it described as a “public nuisance” tied to sports-related event contract offerings.

The CFTC framed its federal lawsuit around the agency’s view that markets listed on CFTC-regulated exchanges fall under a federal regulatory framework. The complaint 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.”

The filing is the latest in a series of federal suits by the CFTC in recent weeks. The agency has also sued Illinois, Arizona, Connecticut and New York. The CFTC chair has pursued rulemaking and said the agency’s swap statute covers event-based contracts listed on regulated exchanges.

State officials and some attorneys general have disagreed, arguing some prediction market contracts resemble gambling and should be regulated under state gaming laws. A bipartisan coalition of 37 state attorneys general filed an amicus brief in a Massachusetts case, arguing a state court should uphold a January ruling that Kalshi cannot offer sports event contracts to residents without a Massachusetts Gaming Commission license. The coalition wrote: “If Congress meant to overturn the long tradition of state regulation over gambling that dates to the founding of the country, it needed to have said so clearly.”

Prediction markets have drawn more attention and higher trading volume since the 2024 U.S. presidential election cycle. Platforms offer contracts tied to political outcomes and sports events, drawing retail traders and regulatory scrutiny. The Wisconsin lawsuit will add to a legal test over whether federal swap law displaces state gambling and gaming rules for these products.