- ▸ CFTC moves to block Wisconsin enforcement, setting up a direct clash between state authority and federal oversight of prediction markets.
- ▸ Seventh Circuit now in play (with Illinois too), adding another potential path for appellate review alongside multiple active circuits.
- ▸ Odds of a circuit split are rising, increasing the likelihood of eventual U.S. Supreme Court involvement.
The Commodity Futures Trading Commission (CFTC) released a statement on Tuesday announcing that it has filed a lawsuit in response to Wisconsin’s legal actions against the operators of prediction markets. While the complaint isn’t yet publicly accessible, the statement makes clear that the Commission wants a federal court to prevent Wisconsin authorities from further pursuing any penalties for the CFTC-regulated entities.
Wisconsin joins Illinois as the second target of litigation within the United States Seventh Circuit Court of Appeals from the Commission, creating a second possible path to receive a petition for review. The map is getting crowded in that regard, with six of 11 appellate courts in the US either already directly or potentially involved.
CFTC announces new lawsuit against Wisconsin
According to the CFTC statement, Wisconsin is the fifth state that the CFTC has filed a complaint in a federal court against. The release likens the lawsuit against Wisconsin to the other four, saying that the filing seeks declaratory and injunctive relief.
It isn’t clear yet which of the two Wisconsin districts the CFTC filed its suit in. What is clear, though, is that the brief is a direct response to Wisconsin’s civil lawsuits against Coinbase, Kalshi, and others filed on April 23 in the Dane County Superior Court.
In those complaints, Wisconsin Attorney General Josh Kaul asked the court to declare prediction market contracts based on sporting event outcomes illegal sports wagers and enjoin the defendants from offering the markets to people in the state. Kaul also sought declarations that the event contracts violate Wisconsin’s public nuisance statute.
Should the federal court grant the CFTC’s request for injunctive relief, Kaul could be barred from moving forward with those actions. The status of prediction markets in Wisconsin could change quickly depending which court acts first.
Competing injunctive relief requests create uncertainty in Wisconsin
Kaul’s request for injunctive relief included both preliminary and permanent actions, meaning that the Dane County court could move on the petition for a preliminary injunction at any point in time. However, the same may apply to the CFTC’s plea to a federal court for Wisconsin.
That creates a situation in which offering prediction market trading to people in Wisconsin could technically violate the Dane County court’s order, and then within days or hours, the federal court could essentially lift that injunction by issuing its own against the state. That is just one of myriad possibilities at this juncture, though.
Following the potential chain of events further, the CFTC’s action against Wisconsin may set up appeals to the Seventh in the future. As a result, the options for a long-awaited US Supreme Court review have expanded.
Chances for circuit court split on prediction markets rising
If there were a market on whether at least two US circuit courts of appeal will issue opposing rulings regarding the nature of prediction markets and the role of state sovereignty, the price on the “yes” side of that market would be climbing. The lawsuit against Wisconsin increases the probability that the Seventh Circuit will consider an appeal.
That possibility already existed via the CFTC’s similar action against Illinois. The CFTC has also sued Arizona (in Ninth Circuit), as well as Connecticut and New York, both in the Second Circuit. The Seventh Circuit joins five others (out of 11 total appellate circuit courts) that have either already taken up an appeal, are currently considering a petition for review, or have a district court within their regions that is involved in prediction market litigation.
- Second — CFTC lawsuit vs. New York sets up appellate path
- Third — Already issued decisions in dispute between Kalshi and New Jersey
- Fourth — Kalshi appeal of lawsuit against Maryland is before the court
- Sixth — Declined to overturn district court decision to deny Kalshi’s injunctive relief request against Ohio
- Ninth — Currently considering an appeal asking for the court to enjoin enforcement actions in Nevada against Kalshi
Splits could occur in any two of these six circuit courts on the pertinent questions, like whether prediction market contracts on sporting event outcomes are sports betting and whether federal statutes preempt states’ authority to regulate trading within their borders. Should that occur, the US Supreme Court taking up an appeal becomes more probable.
That probability elevates if multiple circuits issue different opinions. With the CFTC’s action against Wisconsin, the Seventh Circuit becomes a more likely source of an opinion.
