Wisconsin Prediction Markets Case Goes Against CFTC, Operators

Prediction markets might have gotten a favorable ruling in Minnesota. But in Wisconsin, prediction markets saw the ruling go the other way, which might be the strongest suggestion yet that this dispute will end up before the Supreme Court.

U.S. District Judge William Griesbach of the Eastern District of Wisconsin rejected the Commodity Futures Trading Commission’s request for an injunction that would have protected Wisconsin prediction markets. Wisconsin had argued that Kalshi, Polymarket and other operators had violated state gambling laws, filing suit in April.

The CFTC responded by suing, moving the suit to federal court. However, Griesbach rejected the CFTC’s argument, saying that the CFTC had not shown it was likely to win on the case’s merits. Griesbach agreed with the CFTC that prediction markets were likely to be harmed, but the requestor must win on both factors to get an injunction.

Notably, Griesbach also rejected the CFTC’s long-standing argument that it holds jurisdiction over sports contracts. He said that the CFTC had not shown that sports contracts counted as swaps, nor did it automatically override Wisconsin state laws on gambling.

What Else Did Judge Griesbach Decide Regarding Wisconsin Prediction Markets?

While the Badger State got some of what it wanted, it didn’t get a total victory. Wisconsin attorney general Josh Kaul had two requests shot down in Griesbach’s court, giving prediction markets a slim pathway to victory.

First, Kaul requested that the CFTC’s case be dismissed, leaving only the state’s lawsuit in Wisconsin state courts. Failing that, Kaul requested a change of venue from the Eastern District of Wisconsin, located in Milwaukee and Green Bay, to the Western District, which sits in the state capital of Madison.

The change of venue likely was both strategic as well as geographical. While Kaul’s office is in Madison, the state capital is also the most liberal part of the state. As such, the Western District is considered less favorable to the federal government than the Eastern District.

Griesbach didn’t accept either request. He didn’t think the merits were clear-cut enough to warrant dismissal, nor did he view the location as a hardship.

That keeps the case potentially alive, with Griesbach continuing to preside as judge. However, Wisconsin prediction markets operators wll have a difficult path to prove their arguments.

How Does the Wisconsin Decision Differ From Minnesota’s?

Within the same week, two very different decisions came from the neighboring states. A major difference is how the states have approached both legal sports betting and prediction markets.

Minnesota attempted to pass a law blocking prediction markets, which federal courts blocked from taking effect. Courts decided that the law as written would put prediction markets at risk, granting an injunction. Wisconsin’s law legalized sports betting, as long as sportsbooks partnered with a tribe and servers originated on tribal lands.

That law offered no such restrictions on legal contracts. With that distinction, the CFTC’s position came down to whether sports betting qualifies as a federally-governed contract. Based on the decisions of both Griesbach and courts in Michigan, the CFTC’s argument appears to have problems.

What’s Likely to Follow?

The biggest question is whether Wisconsin state courts will issue an injunction against individual prediction markets. Currently, Wisconsin prediction markets remain legal, but that’s not guaranteed to last.

The CFTC’s lawsuit will continue. Griesbach has ordered the case to be scheduled, which will be decided in his court in Green Bay. The CFTC could also seek an appeal to a higher court. However, unless an injunction happens at the state level, it will likely wait out Griesbach’s ruling and appeal if his verdict is unfavorable.