The U.S. state of Wisconsin has filed a lawsuit against five major platforms—Coinbase, Polymarket, Kalshi, Robinhood, and Crypto.com—alleging that their prediction market offerings violate state gambling laws. The complaint, filed by Wisconsin Attorney General Josh Kaul in Dane County, argues that so-called “event contracts” are essentially sports bets disguised as financial instruments, which are illegal outside of tribal casinos in the state.
Wisconsin’s Argument
According to the lawsuit, these platforms facilitate what the state considers illegal sports betting by allowing users to wager on real-world outcomes—most notably sporting events. Kaul stated: “Sports betting and other forms of commercial gambling have long been illegal in the state of Wisconsin. Event contracts are no different than ordinary sports bets.” The state contends that labeling these products as financial contracts does not change their gambling-like nature, pointing to how platforms charge fees similar to betting systems and often market their services in ways that promote gambling activity.
Industry Pushback
The companies named in the lawsuit have pushed back, arguing that their services are regulated at the federal level by the Commodity Futures Trading Commission (CFTC). Kalshi spokesperson Elizabeth Diana said the platform is “a regulated exchange for real-world event trading, very different from traditional state-run sportsbooks and casinos,” and expressed confidence in its legal position. Robinhood noted that its event contracts are federally regulated and that it plans to defend itself. Coinbase’s Chief Legal Officer, Paul Grewal, 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.”
Growing Legal Pressure
This lawsuit is part of a broader wave of scrutiny against prediction markets across the United States. States such as Nevada, New York, and Arizona have previously raised similar concerns or taken legal action. The mounting cases are creating a legal conflict between state gambling laws and federal derivatives oversight that could ultimately reach the U.S. Supreme Court. The outcome of these cases could shape the future of prediction markets in the country, potentially forcing platforms to restrict their services or, if they win, expanding their reach. The lawsuit also follows the introduction of the federal PREDICT Act, a bipartisan bill aimed at banning top officials and their families from making political bets on such platforms.
