Federal Judge William Griesbach of the US District Court for the Eastern District of Wisconsin has rejected a preliminary injunction request from the Commodity Futures Trading Commission (CFTC). The federal regulator had sought to block Wisconsin from enforcing its state gambling laws against prediction market platforms.
The dispute stems from last April, when the CFTC brought the case to federal court after Wisconsin authorities sued major industry players: Kalshi, Polymarket, Crypto.com, Robinhood, and Coinbase. Wisconsin firmly alleged that sports event contracts offered on these platforms amount to operating unlicensed sports betting businesses.
In his ruling, the judge determined that the CFTC failed to demonstrate a likelihood of success on the merits. The agency was also found to have failed to show irreparable harm if Wisconsin continues enforcing its laws, while also failing to establish that the balance of equities tipped in its favor.
At the same time, the judge denied motions to intervene and preliminary relief filed by Kalshi and Crypto.com, reasoning that sports event contracts on those platforms have not been proven to meet the statutory definition of “swaps” under the Commodity Exchange Act.
“Wisconsin’s gambling laws do not conflict with federal commodities regulations and are not preempted by them,” Griesbach wrote in the ruling.
The court victory was immediately welcomed by Wisconsin Attorney General Josh Kaul, who issued a stern warning to prediction market operators: “Thinly disguising unlawful behavior does not make it legal.”
Different States, Different Outcomes
The Wisconsin case highlights the legal fragmentation within the United States when dealing with emerging business models. Just days earlier, Judge Katherine Menendez in Minnesota took a completely opposite stance.
Judge Menendez issued a temporary injunction blocking Minnesota’s gambling restrictions, finding that the CFTC, Kalshi, and Polymarket had a realistic chance of demonstrating federal preemption over state rules.
However, the Wisconsin decision deals a significant blow to the federal preemption argument. Legal analyst Daniel Wallach noted that five similar state enforcement cases are now likely to be sent back to Wisconsin state courts, as federal statutes were not found to automatically displace local gambling laws.
One Business, Fifty Sets of Rules
This mounting legal friction adds to the CFTC’s regulatory headache. Long before the setback in Wisconsin court, the commission faced pressure from a coalition of 44 state attorneys general urging it to withdraw and revise its proposed amendments to Rule 40.11.
The CFTC expressed disappointment with Judge Griesbach’s ruling and confirmed its intent to appeal. Until these legal proceedings reach a unified resolution, prediction market platforms face the burden of dual regulatory exposure.
The decision underscores a harsh reality: platforms like Polymarket and Kalshi now face a high risk of navigating separate licensing requirements across individual states rather than operating under a single federal umbrella. A contract deemed lawful in one jurisdiction could be classified as illegal gambling simply by crossing state lines.
Reported via crypto.news.
Disclaimer: This article is for informational and educational purposes only, not financial advice. Cryptocurrency assets are highly volatile and carry significant risk. Always do your own research (DYOR) and never invest more than you can afford to lose.
