Wisconsin Files Legal Salvos Against Crypto Platforms Over Sports Event Contracts CATEGORY: Industry News

Wisconsin Attorney General Josh Kaul has launched legal volleys against Kalshi, Robinhood, Coinbase, Polymarket, and Crypto.com, alleging the platforms are running a digital shell game with "event contracts" to sidestep state gambling statutes. The complaints landed on April 23 in Dane County Circuit Court, seeking preliminary and permanent injunctions to bar the companies from hawking sports-related markets to Wisconsin residents, along with a court declaration that their operations run afoul of state gambling law and constitute a public nuisance. The suits contend that sports betting and most commercial gambling have been verboten in Wisconsin for ages—except in very narrow circumstances—and that slapping a different label like "event contracts" on the same old wagering doesn't magically transform it into something legal.

The filings get granular on how the platforms architect contracts that pay out based on real-world event outcomes while charging fees per trade, extracting revenue from Wisconsin users in alleged contravention of state law. The complaints zero in on Kalshi specifically, noting that sports contracts make up nearly 90% of its business and citing estimates that annualized revenue from those products exceeds $1 billion. Robinhood and Coinbase find themselves in the crosshairs for non-exclusive distribution deals that funnel their users' orders into Kalshi's prediction markets, with Robinhood's trading hub processing billions of dollars in volume across sports, macro data, and political outcomes.

The Wisconsin salvo lands amid a broader state-level crackdown wave against similar products. On April 3, a Nevada judge extended an order blocking Kalshi from offering sports markets to customers there, classifying them as unlicensed gambling, while Arizona authorities have pursued separate enforcement actions targeting the company's sports-related contracts. Back in January, Tennessee's sports betting regulator fired off cease-and-desist letters to Kalshi, Polymarket, and Crypto.com, demanding they stop sports event contracts for state residents, void existing wagers, and refund local users. New York's attorney general has also been sniffing around Coinbase's Kalshi-powered prediction markets, which let users trade on real-world outcomes across all 50 states.

The state enforcement tsunami collides with a shifting federal landscape. The Commodity Futures Trading Commission and U.S. Department of Justice have backed arguments that certain event contracts fall within the federal derivatives framework rather than state gambling codes, creating jurisdictional friction. On April 6, a federal appeals court delivered a ruling friendly to Kalshi, curbing New Jersey's ability to enforce its gambling laws against certain CFTC-regulated sports contracts. That ruling built on prior decisions: a district court in October 2024 rejected CFTC arguments that election contracts constituted unlawful gambling, and the D.C. Circuit upheld that decision in March 2025.

The CFTC subsequently turned up the heat. On May 1, the agency filed a notice of appeal to the U.S. Supreme Court, challenging the appellate ruling that permitted Kalshi to offer election-related event contracts. The agency's move sets the stage for a high-stakes constitutional showdown that could determine whether prediction markets qualify as federally regulated financial instruments or illegal gambling under federal law—potentially drawing a line under the patchwork of conflicting state enforcement actions that have left the industry in regulatory limbo.