A federal court in Wisconsin has refused the Commodity Futures Trading Commission's request to stop the state from enforcing its gambling laws against prediction market operators. Judge William Griesbach denied the preliminary injunction on July 28, finding the regulator had not shown a likelihood of success on the merits.
The order lets Wisconsin continue its case against Kalshi, Coinbase, Robinhood, Polymarket and Crypto.com while the federal proceedings run.
Contracts and preemption
The CFTC argued that sports-event contracts are swaps under the Commodity Exchange Act, and that the CEA therefore displaces state gambling law. Griesbach doubted both points. He cited a June ruling from a Michigan court in the Polymarket case, where the CFTC's reading of 'swap' was said to stretch far enough to cover service contracts, mortgages and marriage contracts. The plain language of Wisconsin's gambling statute, the judge concluded, reaches sports contracts.
Even treating the contracts as swaps, the federal statute does not override state gambling regulation. Griesbach followed an April decision by the Sixth Circuit in the Kalshi matter: the CFTC's 'exclusive jurisdiction' applies to other federal agencies, not to states. Operators can meet both regimes by keeping their products out of Wisconsin.
A split between states
A Minnesota court ruled the other way a day later, granting the CFTC's injunction. Judge Katherine Menendez held that Kalshi and Polymarket contracts are likely swaps and predominantly governed by federal law.
The divide leaves two questions open: whether the contracts qualify as swaps, and whether federal law prevails. The Wisconsin case continues, with a conference set for August 25.
