Wisconsin has joined a growing legal assault on prediction markets, filing suit against Kalshi, Coinbase, Polymarket, Robinhood and Crypto.com and accusing the platforms of operating as unlicensed gambling venues rather than regulated financial exchanges.
Attorney General Josh Kaul framed the cases bluntly: “Thinly disguising unlawful conduct doesn’t make it lawful,” he said in a Thursday press release announcing the complaints filed in Dane County. The core legal question is simple but consequential: are these “event contracts” financial instruments governed exclusively by federal commodity law, or are they bets subject to state gambling regulations? The answer could determine whether the industry is governed by one federal rulebook or split across 50 separate state regimes — and the dispute is increasingly likely to reach the Supreme Court.
Wisconsin’s filings target three parallel ecosystems. One complaint names Crypto.com and its derivatives arm. Another goes after Polymarket and related entities. A third focuses on Kalshi and two distribution partners, Robinhood and Coinbase — the latter two route prediction-market orders to Kalshi, the complaint says — arguing the platforms collectively facilitate sports betting for Wisconsin residents.
The state’s theory of the case is straightforward: users pay money to take positions on real-world outcomes and receive a fixed payout if they win. The complaints cite concrete examples, such as contracts tied to NCAA tournament games that trade at implied probabilities and pay $1 for a winning position while returning nothing for a loss. Prosecutors also point to the platforms’ own marketing — Kalshi ads calling the service “The First Nationwide Legal Sports Betting Platform” and Polymarket descriptions referring to users “bet[ting] on the outcome of future events” — as evidence the products function as wagers.
Wisconsin emphasizes that the platforms earn fees on each contract, likening the model to a casino taking a cut of bets. Under state law, prosecutors argue, that structure fits squarely within statutory definitions of gambling regardless of a contract’s label or whether another trader takes the opposing position.
Industry defendants rely on federal preemption. Kalshi, in particular, contends its event contracts are swaps listed on a regulated exchange and therefore fall under the Commodity Futures Trading Commission’s exclusive jurisdiction. That argument received a boost earlier this month when the Third Circuit sided with Kalshi, treating the CFTC’s decision not to block the contracts as effectively resolving the jurisdictional issue in the company’s favor.
State-level reactions have been consistent in the opposite direction. Nevada regulators called the contracts “indistinguishable” from gambling, and New York Attorney General Letitia James has said “each contract is a bet.” Wisconsin’s suits add to a patchwork of challenges across the country that have already forced companies to defend their models in multiple courts.
The stakes go beyond a handful of companies. A ruling that these products are financial contracts would keep prediction markets under federal oversight; a contrary ruling that they are bets would subject them to state gaming laws, licensing, and enforcement, fragmenting the regulatory landscape and raising compliance costs. With courts split and issues of federal versus state authority at play, a final, nationwide resolution may well end up before the U.S. Supreme Court.
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