- The state argues these platforms operate as illegal gambling rather than regulated financial products.
- Regulators say these contracts legally qualify as wagers under Wisconsin law.
Wisconsin has launched legal action against several major prediction market platforms, arguing that their products operate as illegal gambling rather than regulated financial instruments.
The lawsuits target Kalshi, Coinbase, Polymarket, Robinhood, and Crypto.com, adding momentum to a growing dispute between state regulators and the federal government over how such markets should be classified.
The complaints, filed in Dane County, focus on event contracts, which allow users to trade on the outcome of real-world events. Wisconsin authorities argue that these contracts meet the legal definition of wagers under state law.
According to the filings, as reported by Coindesk, users pay money to take positions on outcomes such as sports results and receive fixed payouts if their predictions are correct. The state claims this structure mirrors traditional betting, regardless of how companies label the products.
The lawsuits cite examples tied to sports events, including NCAA tournament games. In these cases, contract prices reflect implied probabilities, with winning trades paying out a fixed amount and losing trades returning nothing.
See Related: Coinbase Files Lawsuits Against Three US States Over Prediction Market Rules
State Defines Contracts As Bets
Wisconsin also points to how platforms generate revenue. The state says companies charge transaction fees on each contract, which it compares to a casino taking a percentage of wagers placed by users.
Marketing language forms another key part of the case. Regulators referenced promotional materials in which Kalshi described itself as “The First Nationwide Legal Sports Betting Platform,” while Polymarket said it allows users to “bet on the outcome of future events.” Officials argue that such statements reinforce their position that these platforms facilitate betting activity.
The lawsuits highlight an ongoing conflict over whether prediction markets fall under federal or state oversight. Companies such as Kalshi maintain that their contracts qualify as financial instruments regulated by the Commodity Futures Trading Commission (CFTC). Under this argument, federal law would preempt state gambling rules.
This position recently gained support from the U.S. Court of Appeals for the Third Circuit. The court treated the CFTC’s decision not to block certain contracts as effectively resolving the jurisdiction issue in favor of federal oversight.
However, several states have taken a different view. Regulators in Nevada have described similar contracts as “indistinguishable” from gambling, while New York Attorney General Letitia James has stated that “each contract is a bet.”
