Key Points
- Wisconsin launched legal proceedings against Kalshi, Coinbase, Polymarket, Robinhood, and Crypto.com for allegedly operating illegal gambling services.
- State prosecutors contend that event contracts provided by these prediction market operators constitute wagers according to Wisconsin statutes.
- Attorney General Josh Kaul emphasized that relabeling products does not transform illegal activities into lawful operations.
- Legal filings reference promotional content from platforms that characterize their offerings as sports betting or wagering on outcomes.
- The state maintains these operators profit by collecting transaction fees from every contract executed by participants.
Wisconsin intensified its confrontation with prediction market companies through formal legal action in state court. The complaints name Kalshi, Coinbase, Polymarket, Robinhood, and Crypto.com for allegedly conducting unauthorized gambling operations. Attorney General Josh Kaul asserted that rebranding wagers as investment instruments does not change their legal character.
State Court Filings Target Multiple Prediction Market Operators
Wisconsin submitted three separate legal complaints in Dane County against distinct groups of defendants. One filing addresses Crypto.com along with its derivatives division regarding event-based contracts. A second complaint focuses on Polymarket and associated companies for providing outcome-dependent contracts to state residents.
The third legal document names Kalshi alongside its distribution collaborators, Robinhood and Coinbase. State authorities allege these platforms enable sports wagering for Wisconsin participants. Legal representatives contend that users purchase outcome-based contracts that function as traditional bets.
The court documents reference specific examples connected to NCAA tournament competitions available on these platforms. Participants acquire contracts valued according to implied probabilities of real-world results. Successful positions yield $1 per contract, while unsuccessful ones return zero value.
Kaul declared, “Thinly disguising unlawful conduct doesn’t make it lawful.” He maintained that Wisconsin statutes categorize such contracts as gambling instruments. Accordingly, he contends the operational framework satisfies the state’s legal criteria for wagering.
The legal filings also highlight corporate advertising content and official declarations. Kalshi’s Instagram account identified the service as “The First Nationwide Legal Sports Betting Platform.” Polymarket advertised itself as “a platform where people can bet on the outcome of future events.”
State prosecutors maintain these public statements reinforce the gambling characterization under Wisconsin law. They contend that platforms earn income by imposing transaction fees on every contract. The state draws parallels between this structure and traditional casino commission models.
Jurisdictional Conflict Over Federal Regulatory Authority
The defendant companies assert that federal regulations govern their service offerings. Kalshi maintains its contracts meet the criteria for swaps listed on federally regulated exchanges. The company claims the Commodity Futures Trading Commission possesses exclusive regulatory authority.
The prediction market sector cites federal preemption as its core legal defense strategy. Kalshi argues that CFTC supervision supersedes contradictory state gambling regulations. Consequently, the company asserts state authorities lack power to regulate federally sanctioned event contracts.
Earlier this month, the Third Circuit issued a ruling supporting Kalshi’s position. The appellate court interpreted the CFTC’s decision against blocking these contracts as resolving jurisdictional questions. This judicial outcome bolstered the company’s federal preemption position.
State regulators nationwide have adopted contrary positions. Nevada authorities described the contracts as “indistinguishable” from traditional gambling products. New York Attorney General Letitia James stated, “Each contract is a bet.”
Wisconsin adds its voice to growing state opposition against prediction market platforms. The legal complaints emphasize state gambling statutes and promotional messaging. The proceedings continue in Dane County Circuit Court.
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