Key Insights:
- Wisconsin filed lawsuits against major prediction markets over alleged illegal gambling operations.
- AG Josh Kaul says “event contracts” are just sports bets disguised as financial instruments.
- Companies push back, arguing that federal CFTC oversight overrides state gambling laws.
Amid rising scrutiny over prediction markets, Wisconsin has joined the legal fight by suing major platforms. In the latest move, Wisconsin filed lawsuits against Kalshi, Coinbase, Polymarket, Robinhood, and Crypto.com.
Attorney General Josh Kaul alleged that these prediction market platforms are essentially unlicensed gambling disguised as financial instruments.
Why is Wisconsin Suing Prediction Markets?
According to the latest findings by Wu Blockchain, Wisconsin is suing prediction markets like Kalshi, Coinbase, Polymarket, Robinhood, and Crypto.com. Reports state that Wisconsin Attorney General Josh Kaul filed lawsuits against these platforms over gambling scheme claims.
Notably, the Attorney General claims that Coinbase, Kalshi, Polymarket, and the other mentioned prediction markets are sidestepping state gambling laws. He added that these platforms falsely label sports betting activity as “event contracts.”
Kaul noted, “Sports betting and other forms of commercial gambling have long been illegal in the state of Wisconsin.” He added that “event contracts are no different than ordinary sports bets.” The Attorney General also stated that these companies are generating significant revenue by violating the state’s gambling regulations.
It is worth noting that this lawsuit comes on the heels of the launch of the PREDICT Act. As previously reported, the PREDICT Act is a bipartisan proposal. It intends to ban top officials and their families from making political bets on prediction markets.
How Did Coinbase, Polymarket, and Kalshi React?
While Wisconsin is taking legal action against prediction markets, companies like Kalshi, Polymarket, and Coinbase are defending themselves. For instance, Kalshi spokesperson Elizabeth Diana stated that the platform is fully governed by federal regulation. It is reportedly operated under nationwide oversight, but not state gambling laws.
She argued that Kalshi functions as a regulated exchange for real-world event trading. According to her, it is very different from traditional state-run sportsbooks and casinos. Diana added that the company is confident its legal position will stand in court.
Robinhood, which is also named in the lawsuit, said its “event contracts” are regulated at the federal level. The company also stated that it plans to defend itself against the allegations.
Coinbase’s Chief Legal Officer, Paul Grewal, also rejected Wisconsin’s claims. He stated that federal law should take priority over individual state actions. He argued that Congress intended prediction and derivatives markets to be regulated at the national level through the CFTC, not by state gambling laws.
Paul added – “Wisconsin’s lawsuit today against Coinbase and others − ‘is exactly the patchwork that Congress replaced wholecloth by creating the CFTC.’ Wisconsin should accept clear and consistent CFTC oversight of prediction markets − just as Congress intended.”
Increasing Scrutiny Over Prediction Markets
It is worth noting that prediction markets are facing growing scrutiny in the US. State authorities are increasingly targeting these platforms, alleging violations of gambling laws.
Naveda regulators described the contracts as “indistinguishable” from betting. At the same time, New York Attorney General Letitia James has said that “each contract is a bet.” Arizona has also filed a lawsuit against platforms like Kalshi. This reinforces the idea that labeling them as financial instruments does not change their core structure.
Wisconsin’s latest lawsuits add to this growing wave of legal pressure on prediction market platforms. Similar cases and regulatory actions are emerging in multiple states, all questioning whether these “event contracts” fall under federal financial oversight or violate state gambling laws.
As more states challenge the industry, the cases are gradually building a broader legal record. This growing conflict between state gambling laws and federal derivatives rules could ultimately reach the US Supreme Court for a final decision on how prediction markets are classified and regulated.