Wisconsin Targets Prediction Markets in Major Unlicensed Gambling Lawsuit

The state of Wisconsin has escalated the legal conflict over prediction markets, filing complaints against Kalshi, Coinbase, Polymarket, Robinhood, and Crypto.com. Attorney General Josh Kaul argues that these platforms are thinly disguising unlawful gambling as financial trading, asserting that the structure of these products falls squarely within the state's statutory definition of a bet. The core of the dispute is jurisdictional. The platforms maintain that their products are financial instruments under the Commodity Futures Trading Commission (CFTC), which would provide federal preemption over state laws. However, Wisconsin and other states, including New York and Nevada, contend these are wagers subject to local gaming regulators. The lawsuits target three distinct ecosystems: one involving Crypto.com, another focusing on Polymarket, and a third targeting Kalshi and its distribution partners, Coinbase and Robinhood. Prosecutors point to contracts on NCAA tournament games and the platforms' own marketing—such as Kalshi's claims of being a 'legal sports betting platform'—as evidence of gambling activity. While the Third Circuit recently provided a boost to Kalshi by treating the CFTC's inaction as a settlement of jurisdiction, the growing number of state-level challenges suggests a collision course with the U.S. Supreme Court. A ruling against the platforms could force a fragmented operational model, requiring companies to navigate 50 different state regulatory frameworks.