Wisconsin sues prediction market firms over illegal betting
The Wisconsin Department of Justice (DOJ) has filed a lawsuit against several major U.S. online prediction market platforms, accusing them of facilitating illegal sports betting under the guise of financial trading products.
Wisconsin Attorney General Josh Kaul confirmed that lawsuits had been filed in Dane County against Kalshi, Robinhood, Coinbase, Polymarket and Crypto.com, along with their affiliates. The legal action seeks to halt what the state describes as unlawful commercial gambling operations targeting residents.
“Thinly disguising unlawful conduct doesn’t make it lawful,” Kaul said. “These companies’ alleged facilitation of sports betting in Wisconsin should be shut down.”
According to the DOJ, the companies offer so-called “event contracts” that allow users to speculate on the outcome of sports events. While marketed as prediction market instruments, regulators argue that these products function identically to traditional sports bets, with payouts tied directly to game results.
The complaints allege that the platforms collect fees on each transaction, effectively profiting from activity that Wisconsin law largely prohibits. With limited exceptions, sports betting remains illegal in the state outside of tribal casinos.
The lawsuits request that the court declare the companies in violation of Wisconsin Statutes and classify their operations as a public nuisance. The DOJ is also seeking both preliminary and permanent injunctions to prevent the platforms from offering sports-related event contracts to users located in Wisconsin.
State argues products mirror traditional wagers
At the heart of the dispute is whether prediction market instruments can be legally distinguished from gambling. The companies maintain that users are not placing bets but rather trading on the likelihood of real-world outcomes, similar to financial derivatives.
However, Kaul rejected that argument, stating that the structure and function of these products leave little room for interpretation.
“No company is above this law. No matter how creatively those companies try to disguise the activity that they’re engaged in, these companies have chosen to flout Wisconsin law,” Kaul said, as reported by FOX6 News. “Event contracts are no different than ordinary sports bets.”
The DOJ further alleges that the scale of these operations underscores their commercial nature. Kalshi, for instance, is reported to generate more than $1 billion in annual revenue from sports-related contracts, accounting for roughly 90 per cent of its total estimated revenue.
The legal filings argue that by generating income directly from these transactions, the companies are engaging in prohibited gambling activity rather than legitimate financial trading.
Companies cite CFTC oversight and legal precedent
The targeted firms have pushed back against the allegations, framing the lawsuit as a conflict between state and federal regulatory authorities.
As reported by 620WTMJ, a local radio station in Wisconsin, a spokesperson for Robinhood said its event contracts are federally regulated by the CFTC (Commodity Futures Trading Commission) and offered through Robinhood Derivatives, LLC, a CFTC-registered entity. The spokesperson added that the company intends to defend itself against the claims.
Kalshi similarly emphasised its federal oversight, stating that the company is a regulated, nationwide exchange for real-world events and is subject to exclusive federal jurisdiction.
Coinbase Chief Legal Officer Paul Grewal also criticised the lawsuit, arguing that Congress had established a unified regulatory framework for derivatives markets. He warned that state-level enforcement actions risk creating a fragmented system inconsistent with federal intent.
Case separate from tribal sports betting expansion
Officials have clarified that the lawsuit is unrelated to recent legislative developments in Wisconsin. Governor Tony Evers recently signed a measure that opens the door to online sports betting by tribal operators, subject to renegotiated compacts and federal approval. However, Kaul stressed that the current case does not fall under that framework.
“The new law specifically relates to gaming that is conducted through facilities that are on tribal lands in Wisconsin,” he said, as quoted by WTMJ. “That’s not the case here.”
Instead, the DOJ maintains that the defendants are operating outside any authorised system, offering products directly to consumers without the regulatory safeguards required under state law.
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