Wisconsin tells Seventh Circuit its sports-betting ban reaches prediction markets

Wisconsin has urged a federal appeals court to preserve the state’s power to enforce its sports-betting ban against prediction-market contracts, rejecting the Commodity Futures Trading Commission’s argument that federal commodities law exclusively governs the products.

The state’s filing follows a July 29 decision by U.S. District Judge William Griesbach against the CFTC. The agency has appealed to the Seventh Circuit in Chicago after suing Wisconsin and four other states over their treatment of sports-related event contracts.

The CFTC contends that the contracts are swaps, a form of financial derivative subject solely to federal commodities regulation, and that federal law therefore preempts Wisconsin’s gambling statutes. Wisconsin’s brief answers that the federal government lacks power to displace state gambling laws. It also argues that, even if such preemption were available, the bets offered through the products remain prohibited under state law.

Wisconsin’s position is that platforms including Kalshi and CDNA facilitate sports betting, which it regards as illegal commercial gambling. The state has maintained that labelling the products event contracts does not change their underlying character as bets on sports outcomes.

That argument parallels Wisconsin’s separate April 23 enforcement action against Kalshi, Robinhood, Coinbase, Polymarket, Crypto.com and their affiliates. The state’s Justice Department sought to halt what it alleged was illegal sports betting offered to Wisconsin customers, asking a Dane County court to declare that making sports-related event contracts available violates Wis. Stat. § 945.03(1m) and creates a public nuisance.

The state’s complaint against Kalshi, Robinhood and Coinbase alleged that contracts traded at agreed prices mirror the odds on sporting results and that the companies take a fee on each transaction. As an illustration, it said a contract backing the University of Michigan in a Final Four game against the University of Arizona traded at about 53 cents on April 3, implying a 53% chance of a Michigan win. A winning contract paid $1, while the opposing side paid nothing.

Wisconsin law makes an exception from its definition of an unlawful bet for bona fide business transactions, including valid contracts for the future purchase or sale of securities or commodities. The state nevertheless argues that the sports contracts are indistinguishable from ordinary sports bets. Its complaint cites a long history of state restrictions, including a specific sports-betting ban dating to 1898, while acknowledging exceptions for certain tribal gaming operations.

The federal government has separately argued that the American Gaming Association should not be allowed to join the appeals case. Its response to Wisconsin’s brief is due Nov. 19; no hearing had been scheduled when the filing was reported.