CFTC expands legal war with US states over prediction markets
The Commodity Futures Trading Commission (CFTC) has sued Wisconsin, adding it to a growing list of US states it has pursued legal action against to assert federal regulatory authority.
The dispute centres on platforms such as Kalshi, Crypto.com, Coinbase, Polymarket and Robinhood, which offer event-based contracts allowing users to speculate on real-world outcomes ranging from elections to financial trends.
Wisconsin lawsuit triggers federal response
Last week, Wisconsin filed a lawsuit against several prediction market operators, alleging they were running unlicensed gambling operations in violation of state law. The move mirrors similar enforcement actions taken by states including New York, Arizona, Illinois and Connecticut.
In response, CFTC Chairman Michael S. Selig filed a counteraction in the US District Court for the Eastern District of Wisconsin, reinforcing the agency’s position that it holds “exclusive jurisdiction” over event contracts under federal law.
Broader crackdown across multiple states
Wisconsin is the latest flashpoint in a nationwide regulatory conflict. In recent weeks, General Letitia James filed lawsuits against Coinbase Financial Markets and Gemini Titan, alleging their prediction market platforms violated state gambling laws.
The CFTC responded by suing New York to block enforcement of state gambling laws. In a statement, the regulator said that it had filed a lawsuit in the US District Court of the Southern District of New York in an effort to halt the state’s efforts to apply state gambling laws against CFTC-registered contract markets. The Commission stated that New York has sought to enforce state laws against CFTC-registered entities through the use of cease-and-desist letters and civil enforcement lawsuits. Meanwhile, Arizona pursued criminal action against Kalshi, though a court has temporarily paused the case, citing likely federal preemption.
Today, the @CFTC sued the State of Wisconsin for encroaching on its exclusive legal authority over prediction markets. We won’t be intimidated by overzealous states seeking to nullify federal law.⬇️https://t.co/s4DVTxVngd
— Mike Selig (@ChairmanSelig) April 28, 2026
The CFTC has also taken legal action or filed briefs in Massachusetts, Connecticut and Illinois as part of what it describes as a broader effort to protect its authority. In its filing, the CFTC stressed its “clear and longstanding exclusive jurisdiction” over event contracts under the Commodity Exchange Act (CEA), warning that state-level interventions risk undermining a unified national regulatory framework.
Prediction markets: Betting or derivatives?
The dispute centres around whether prediction markets should be classified as gambling or financial trading. State regulators, backed by groups like the American Gaming Association, argue that these platforms resemble betting. However, the CFTC maintains that event contracts fall under the CEA, making them a form of regulated derivatives trading rather than gambling. The CFTC argues that allowing states to regulate prediction markets would create a fragmented system, undermining market stability and investor protections.
Selig has repeatedly criticised what he calls “overzealous” state actions, warning they risk limiting access to financial markets and creating inconsistent regulatory obligations. The regulator argues that these interventions create legal uncertainty and threaten the stability of markets already regulated at the federal level. Selig added that similar attempts by states in the past had led to “inconsistent and contrary obligations” for market participants, an approach Congress rejected due to the risks it posed.
Amid ongoing tensions, the CFTC recently issued an Advanced Notice of Proposed Rulemaking to address uncertainty around how existing laws apply to prediction markets. The agency signalled it intends to move forward with clearer rules to reinforce its regulatory framework and address emerging use cases in event-based trading.
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