CFTC lawsuit in Wisconsin follows similar recent action in New York and Arizona
The Commodity Futures Trading Commission (CFTC) has responded to Wisconsin’s lawsuit against prediction market platforms by filing its own lawsuit against the state.
The legal action by the CFTC comes after Wisconsin attorney general Josh Kaul filed complaints last week against Coinbase, Crypto.com, Kalshi, Polymarket, and Robinhood, accusing them of offering sports betting under the guise of event contracts.
On Tuesday, the CFTC filed a complaint against Wisconsin Governor Anthony Evers, AG Kaul, and John Dillet, head of Wisconsin’s Division of Gaming.
The CFTC complaint states that the Commodity Exchange Act (CEA) provides a comprehensive framework for the regulation of commodity derivatives transactions in the United States, with the CFTC designated as the federal agency with “exclusive jurisdiction” over the regulation of commodity futures, options, and swaps traded on federally regulated exchanges.
“Wisconsin’s attempt to criminalize and shut down federally regulated markets intrudes on the exclusive federal scheme Congress designed to oversee national swaps markets,” says the CFTC. “Prompted by the evolution of national financial markets and repeated conflicts with state law, Congress enacted the CEA, granting the CFTC exclusive jurisdiction to regulate those markets and enacting a comprehensive federal regulatory framework that preempts state laws that attempt to ban the operation of, or transactions on, CFTC-regulated exchanges.
“This comprehensive federal regulatory scheme preempts Wisconsin law as applied to event contracts traded on federally regulated exchanges.”
The CFTC also argues that event contracts do not fall under the definition of “bets” as defined in Wisconsin Statutes § 945.01(1), therefore, offering event contracts for trade to residents of Wisconsin cannot violate Wisconsin Statutes § 945.03.
The CFTC complaint seeks a judgment declaring that the application of state gambling laws against CFTC-designated contract markets violates the Supremacy Clause of the US Constitution.
It also seeks a permanent injunction that prohibits Wisconsin from enforcing any state gambling laws against CFTC-designated contract markets.
“States cannot circumvent the clear directive of Congress,” said CFTC chairman Michael Selig. “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.”
The CFTC sued New York last week after state attorney general Letitia James filed lawsuits against prediction market providers Coinbase and Gemini Titan, accusing them of operating illegal gambling businesses in the state.
This followed similar legal action in Arizona earlier this month, when the CFTC intervened on behalf of Kalshi.