Key facts
- A federal court rejected the CFTC's motion for a preliminary injunction against Wisconsin in a case concerning sports prediction markets.
- The court also denied motions from prediction market platforms Kalshi and Crypto.com to intervene in the lawsuit.
- Wisconsin had sued Kalshi, Polymarket, Crypto.com, Robinhood, and Coinbase, alleging their sports event contracts violated state gambling laws.
- The CFTC argued it had exclusive jurisdiction over these platforms.
- The presiding judge suggested state gambling laws could apply to CFTC-regulated sports contracts.
- Legal experts anticipate the cases will be remanded to state court, potentially resulting in injunctions against these platforms in Wisconsin.
A federal court has dealt a significant setback to the Commodity Futures Trading Commission (CFTC) and prediction market platforms like Kalshi and Polymarket in their dispute with states over sports event contracts. The court rejected the CFTC's motion for a preliminary injunction that would have prevented Wisconsin from enforcing its laws against these platforms.
In April, the CFTC initiated a lawsuit against Wisconsin, aiming to assert its exclusive jurisdiction over prediction markets. This action followed Wisconsin's own lawsuits against Kalshi, Polymarket, Crypto.com, Robinhood, and Coinbase, which alleged that their event contracts violated the state's gambling laws. The court's decision also denied motions from Kalshi and Crypto.com to intervene in the preliminary injunction proceedings.
Presiding Judge William Griesbach noted that Wisconsin's commercial gambling statute appears to cover sports-related event contracts registered with the CFTC, signaling that state laws could indeed govern these markets. This ruling echoes a similar decision in a case involving Kalshi and New York, where a judge ruled that state gambling laws applied to sports-related contracts and were not preempted by the Commodity Exchange Act.
Legal expert Daniel Wallach anticipates that the lawsuits removed to federal court will be remanded back to state court due to a lack of "complete preemption." He further suggested that state courts are likely to issue preliminary injunctions, barring these platforms from offering sports contracts within Wisconsin.