A federal court in Wisconsin has declined to halt the state's gambling laws as they apply to sports prediction markets, delivering a significant setback to the U.S. Commodity Futures Trading Commission's (CFTC) position that it can regulate the prediction market independently without state-level action. The decision underscores a widening jurisdictional fault line between federal derivatives oversight and state gaming regulators as prediction market platforms rapidly expand into sports-related contracts — a product category that closely resembles traditional sports betting, which has historically been regulated at the state level.

Judge Rejects CFTC's Emergency Request

On July 29, 2026, United States District Court Judge William Griesbach refused the CFTC's motion for a preliminary injunction against Wisconsin. The Commission had sought to block the state from enforcing its gambling laws against prediction markets that offer sports event contracts.

The CFTC's request was based on the argument that federal regulation of prediction markets falls within the exclusive competence of the Commission. However, Judge Griesbach determined that mere registration with the CFTC cannot exempt prediction market companies from complying with state gambling laws during the litigation period.

Kalshi and Crypto.com were among the companies that could not become parties to the lawsuit.

Court Refuses to Block Wisconsin Laws

The case centers on whether Wisconsin's gambling laws conflict with federal law. Judge Griesbach found that the Commodity Exchange Act does not explicitly prohibit Wisconsin from enforcing its gambling statutes.

The court noted that Wisconsin's gambling laws may apply to sports-related event contracts. While prediction platforms maintain these contracts are financial products, state officials contend they constitute sports bets and are therefore subject to state gaming regulation.

Judge Griesbach further ruled that the CFTC had not demonstrated irreparable harm — whether immediate or permanent — that would result from Wisconsin enforcing its gambling laws.

Wisconsin Lawsuits Target Five Prediction Platforms

The ruling follows a lawsuit filed by the state in April against Kalshi, Polymarket, Crypto.com, Robinhood, and Coinbase. Wisconsin alleged that these companies provided contracts related to sports activities without obtaining the necessary gambling licenses under state law.

In response, the CFTC filed its own case, arguing that states have no right to intervene in federal derivative markets. Following the court's decision, Wisconsin can now proceed with its lawsuit.

Appeal Expected as Legal Battle Continues

The Wisconsin ruling is part of a broader legal landscape surrounding prediction market regulation in the United States. Previously, the U.S. Court of Appeals for the Third Circuit ruled in Kalshi's favor, holding that federal regulation can be more stringent than state regulations.

Both cases will now be heard in state court. Attorney Daniel Wallach stated that state courts could rule in favor of a preliminary injunction preventing prediction platforms from offering sports event contracts in Wisconsin.

https://x.com/WALLACHLEGAL/status/2082524650756591761

Kalshi and the CFTC are expected to appeal the decision to the U.S. Court of Appeals for the Seventh Circuit. The outcome could prove pivotal in determining which authority holds ultimate jurisdiction over the growing prediction market industry. A Seventh Circuit ruling at odds with the Third Circuit's earlier decision could elevate the jurisdictional question toward the U.S. Supreme Court, leaving platforms operating across state lines to navigate an increasingly fragmented regulatory map in the interim.