A federal court has handed the Commodity Futures Trading Commission a significant defeat in its effort to establish national authority over prediction markets, ruling that Wisconsin can proceed with gambling enforcement against platforms including Kalshi and Polymarket.
Judge William Griesbach of the U.S. District Court for the Eastern District of Wisconsin rejected the CFTC’s bid for a preliminary injunction that would have blocked the state from applying its gambling laws to federally regulated prediction market operators. The decision marks a critical juncture in the ongoing battle between federal commodities regulators and state gambling authorities over who controls this rapidly expanding sector.
The CFTC filed its federal case in April after Wisconsin launched lawsuits against Kalshi, Polymarket, Crypto.com, Robinhood, and Coinbase. The state alleges these platforms are offering unlicensed sports betting disguised as financial contracts, a characterization the companies and the federal regulator vigorously dispute.
Court finds CFTC unlikely to prove federal preemption
In his ruling, Griesbach determined that the CFTC had not demonstrated it was likely to succeed on the merits of its case, a key requirement for granting a preliminary injunction. The judge also found the agency failed to show it would face irreparable harm or that the balance of equities favored federal intervention.
The CFTC’s central argument rested on classifying sports event contracts as swaps under the Commodity Exchange Act, which would place them under exclusive federal jurisdiction. Griesbach, however, concluded the agency had not established that sports contracts meet the statute’s definition of swaps, a determination that proved fatal to the injunction request.
The court also turned away separate intervention attempts from Kalshi and Crypto.com, which had sought to join the federal case and pursue their own preliminary relief.
Wisconsin’s gambling authority remains intact
Beyond the swap classification issue, Griesbach rejected the CFTC’s broader claim that federal commodities law preempts Wisconsin’s gambling statutes. The judge wrote that Wisconsin’s gambling laws do not conflict with federal commodities regulations and remain enforceable against these platforms.
The ruling suggests that federal registration alone does not shield prediction market platforms from state gambling enforcement when their products involve sporting outcomes. Wisconsin Attorney General Josh Kaul has characterized the contracts at issue as sports bets repackaged as financial instruments.
Speaking when the state filed its lawsuits in April, Kaul stated that thinly disguising unlawful conduct does not make it lawful, and called for shutting down what he described as the companies’ facilitation of sports betting in Wisconsin.
Legal analyst Daniel Wallach indicated the five state cases are likely to return to Wisconsin courts, where state judges could consider injunctions preventing the platforms from offering sports contracts within state borders.
Nationwide pushback from state attorneys general
The Wisconsin ruling adds momentum to a broader challenge facing the CFTC from state gambling regulators across the country. Attorneys general from 44 states recently submitted a joint letter urging the agency to withdraw and rewrite proposed amendments to Rule 40.11, which would formalize the CFTC’s oversight framework for prediction markets.
The coalition, led by Ohio Attorney General Andy Wilson, argues the proposed rule exceeds the CFTC’s statutory authority under the Commodity Exchange Act and encroaches on gambling oversight that states have traditionally controlled. The states contend that Congress has not clearly authorized the CFTC to assume control over sports betting markets, an area they have regulated for decades.
The coordinated state objection underscores the regulatory uncertainty facing prediction market operators. If state gambling laws apply alongside federal commodities rules, platforms could confront a patchwork of licensing requirements and restrictions that vary dramatically by jurisdiction.
Conflicting court rulings create regulatory confusion
The Wisconsin decision stands in sharp contrast to a ruling issued earlier this week in Minnesota. U.S. District Judge Katherine Menendez temporarily blocked Minnesota’s new prediction market ban, finding that the CFTC, Kalshi, and Polymarket were likely to succeed in their federal preemption argument. That injunction allows the platforms to continue operating in Minnesota while litigation proceeds.
The divergent outcomes leave the prediction markets industry without a consistent national framework. Courts in Wisconsin and New York have sided with state gambling authorities, while Minnesota’s ruling supports the CFTC’s position that certain event contracts fall under exclusive federal oversight.
For users and platforms alike, the split creates immediate practical consequences. Access to prediction markets may increasingly depend on state-by-state determinations rather than federal approval, forcing operators to navigate conflicting legal standards across dozens of jurisdictions.
A CFTC spokesperson said the agency was disappointed with the Wisconsin decision and plans to appeal. The appellate process will determine whether Wisconsin’s lawsuits proceed in state court and whether the affected platforms must halt sports-related contracts in the state. The outcome could also influence how other states approach enforcement against federally regulated prediction market operators.
Based on reporting by Crypto News.