Federal Judge Denies CFTC Bid to Block Wisconsin Prediction Market Enforcement

A federal judge in Wisconsin has denied the Commodity Futures Trading Commission’s (CFTC) request to block the state from enforcing its gambling laws against prediction market operators. The court rejected the regulator’s argument that federal commodities law preempts state gambling enforcement.

In a July 28 decision, U.S. District Judge William Griesbach denied the CFTC’s motion for a preliminary injunction. The court found that the agency failed to demonstrate it was likely to succeed on the merits of its arguments.

The ruling allows Wisconsin to continue pursuing enforcement actions against operators, including Kalshi, Coinbase, Robinhood, Polymarket and Crypto.com, while the federal litigation proceeds.

Court Rejects CFTC’s Core Preemption Arguments

The CFTC argued that sports-event contracts are “swaps” regulated exclusively under the Commodity Exchange Act (CEA). Thus, the agency argues the CEA preempts Wisconsin’s gambling laws.

Judge Griesbach concluded the agency was unlikely to prevail on either point. He questioned whether the contracts qualify as swaps under the CEA and found that the CFTC’s interpretation stretched the statute beyond Congress’s intent.

Quoting a June federal ruling in Michigan against Polymarket, the court warned that accepting the regulator’s position would vastly expand the scope of federal commodities law:

The definition of the term ‘swap’ becomes so broad that it sweeps in any agreement or transaction dependent on anything happening that could conceivably result in any degree of financial consequence for anyone.”

The opinion continued that such an interpretation:

…would intrude not only on the province of state gambling law but also contract law (service contracts), property law (mortgages), and family law (prenuptial agreements), among others.”

The judge ultimately concluded:

The CFTC has not shown that it is likely to prevail on its argument that the CEA’s definition of ‘swaps’ covers the event contracts offered by entities such as Kalshi.”

Wisconsin Gambling Laws Likely Apply

The court also expressed skepticism toward the CFTC’s argument that Wisconsin’s gambling laws do not cover sports event contracts.

Judge Griesbach wrote that the state’s commercial gambling statute appears to encompass the products at issue.

…the plain language of Wisconsin’s commercial gambling statute seems to cover sports-related event contracts registered with the CFTC.”

The judge added that sports event contracts “would seem to fall well within the scope of the statute.”

Court Finds No Federal Preemption

Even assuming the contracts qualify as swaps, the court found the CFTC was unlikely to establish that federal law preempts Wisconsin’s gambling laws.

Judge Griesbach agreed with a Sixth Circuit ruling against Kalshi in April. There, the court found that the CEA’s grant of ‘exclusive jurisdiction’ refers to the CFTC’s authority relative to other federal agencies, not to state gambling laws generally.

The court also rejected the CFTC’s field preemption argument. Judge Griesbach emphasized that gambling regulation has historically fallen within state police powers.

The power of the state to enact laws to suppress gambling cannot be doubted…”

The opinion also rejected CFTC’s arguments that complying with state law interferes with federal law. The judge concluded that operators could comply with both federal commodities regulations and Wisconsin law by simply not offering the disputed products in the state. The opinion also noted that the CEA permits, but does not require, operators to offer the contracts.

The judge agreed with the state’s arguments:

By complying with stricter state law, prediction markets necessarily comply with more forgiving federal law.”

Standing Upheld, Intervention Requests Denied

Although Wisconsin argued the CFTC lacked standing to bring the lawsuit, the court rejected that argument. The ruling held that the agency had sufficiently alleged interference with federal policy to proceed.

The judge also denied motions by Kalshi and Crypto.com to intervene, finding the CFTC adequately represented their legal interests. A separate motion by the American Gaming Association to intervene on Wisconsin’s side was likewise denied.

The decision does not end the case. Judge Griesbach scheduled a telephone scheduling conference for Aug. 25. In the conference, the parties will discuss discovery, potential dispositive issues and the next steps in the litigation.

Mixed Week for CFTC in Prediction Market Cases

The Wisconsin ruling came just one day after a federal judge in Minnesota granted the CFTC’s request for a preliminary injunction against that state’s new prediction market law.

Unlike Judge Griesbach, Judge Katherine Menendez concluded the CFTC was likely to succeed on at least part of its express preemption claim. The court found that some event contracts offered by Kalshi and Polymarket likely qualify as “swaps” under the CEA and therefore fall within the CFTC’s “exclusive jurisdiction.”

The opposing rulings illustrate the growing divide among courts on two central questions: whether sports-event contracts qualify as swaps under the CEA and whether federal law preempts state gambling laws.

While the Minnesota court found Congress likely intended the CFTC to have exclusive authority over at least some prediction market event contracts, the Wisconsin court concluded the agency had not shown it was likely to prove either that the contracts are swaps or that federal law preempts Wisconsin’s gambling laws.