Wisconsin Sues Kalshi, Coinbase, Polymarket Over Prediction Markets

Wisconsin has sued major prediction-market platforms including Coinbase and Polymarket, arguing that their services constitute illegal gambling.

CoinDesk reported on April 24 that Wisconsin prosecutors filed suit against Kalshi, Coinbase, Polymarket, Robinhood and Crypto.com. The state contends that the event contracts offered on those platforms are unlicensed gambling products rather than investment instruments.

Prosecutors argue that the products meet the definition of gambling under state law because users wager on the outcome of real-world events and receive a fixed payout if they are correct. They cited sports-based contracts, including those tied to NCAA game results, as a leading example, and said the fee structure resembles that of a casino.

Wisconsin Attorney General Josh Kaul said, "Putting a thin wrapper around illegal conduct does not make it legal."

The complaint also cites the companies' marketing, including descriptions such as the "first legal national sports betting platform" and platforms where users can bet on the outcome of future events. Wisconsin argues that if a product is betting in substance, it should be treated as gambling regardless of its name or trading structure.

The lawsuit deepens a growing conflict between federal and state authorities over the legal status of prediction markets. At the center of the dispute is whether the products are financial instruments under the jurisdiction of the Commodity Futures Trading Commission or are instead subject to state gambling laws.

The industry maintains that the products fall under federal oversight. Kalshi, in particular, has argued that its contracts are derivatives listed on a regulated exchange and therefore fall under the CFTC's exclusive authority. A recent ruling by the U.S. Court of Appeals for the Third Circuit partly backed that view, citing regulators' failure to block the contracts.

State governments, however, have consistently treated the products as gambling. Nevada has said the contracts are indistinguishable from gambling, while New York prosecutors have argued that all such contracts are effectively bets.

Wisconsin's lawsuit adds to a growing list of state-level cases and raises the possibility that the U.S. Supreme Court will ultimately decide the legal status of prediction markets.