Wisconsin Attorney General Josh Kaul recently filed three lawsuits in Dane County Circuit Court against top prediction market platforms such as Kalshi, Robinhood, Coinbase, Polymarket, and Crypto.com. The state government accuses these platforms of operating sports betting under the guise of "event contracts," directly violating Wisconsin's gambling laws. Kaul was unequivocal at the press conference—no company is above the law, regardless of how they disguise sports betting as financial derivatives. Event contracts and ordinary sports bets are fundamentally the same. This legal action is backed by Wisconsin's policy framework, which has strictly limited sports betting to tribal casinos since 2021. Earlier this month, the state passed a bill allowing online sports betting, but only if servers are located on tribal land and contract renegotiations are completed. Kaul emphasized that this lawsuit is completely unrelated to the new legislation.
The three lawsuits directly target the legal disguise of "event contracts"
The court documents submitted by Wisconsin directly compare the trading patterns of prediction markets with traditional gambling. For example, in a college basketball game, the contract price purchased by users on the platform reflects the implied probability, and if the prediction is correct, they receive a payout; otherwise, it results in nothing. Kaul sees this mechanism as betting on the outcomes of sports events, with the platform taking a commission from each transaction, thereby generating substantial illegal gambling revenue from Wisconsin residents. The state currently seeks a court injunction to declare these platforms in violation of Wisconsin law and to prevent their continued operation within the state. Although there is no direct pursuit of fines at the moment, officials hint that economic penalties could be considered if the evidence is sufficient.
This action by Wisconsin is not an isolated case; states like New York have previously taken similar measures against prediction markets, but Wisconsin's inclusion of crypto and fintech giants like Robinhood, Coinbase, and Crypto.com in the defendant list extends the legal battle far beyond traditional gambling regulation.
Strong responses from platforms, reigniting the federal vs. state jurisdiction debate
Facing the accusations from Wisconsin, the platforms' responses are highly unified: these products are derivatives regulated by the federal Commodity Futures Trading Commission and should not be subject to state-level gambling laws. A spokesperson for Robinhood explicitly stated that its event contracts are federally regulated products provided by CFTC-registered entity Robinhood Derivatives, LLC, and the company will defend itself in this lawsuit. Kalshi goes further, citing previous court rulings, claiming that as a national exchange under exclusive federal jurisdiction, its products fundamentally differ from state-regulated sports betting and casinos. Coinbase's Chief Legal Officer, Paul Grewal, points the contradiction directly at regulatory fragmentation—Congress has already clarified that consumers should enjoy uniform federal regulation in the derivatives market, and state law enforcement attempts to ban these markets are merely reassembling the patchwork of state-by-state regulation that Congress has completely replaced.
Collision of tribal gambling framework with emerging business models
Wisconsin's gambling landscape has long been dominated by tribal casinos, and even after limited legalization in 2021, sports betting remains firmly locked within tribal lands. The new law signed this month opens the door to online gambling, but the strict condition that servers must be located on tribal land means that any form of mobile betting requires renegotiating contracts with the eleven federally recognized tribes. Prediction market platforms have found a short-term arbitrage opportunity in this regulatory gap—entering Wisconsin under the guise of federally regulated derivatives and bypassing the entire tribal gambling license system. Kaul's lawsuit essentially uses judicial means to block this detour.
PASA official website continues to track the escalating legal encirclement of North American prediction markets and state gambling regulation, noting that Wisconsin's lawsuit, along with enforcement actions in states like Nevada, New Jersey, and Arizona, forms a legal encirclement from west to east. As federal rule-making still queues up on the CFTC's agenda, states are no longer waiting but are choosing to fire directly with their own gambling laws.
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This article is from "PASA-Global iGaming Leaders," a gambling industry news channel: https://t.me/pasa_news
Original in-depth gambling channel: https://t.me/gamblingdeep
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PASA Matrix: @pasa002_bot
PASA official website: https://www.pasa.news
