Wisconsin Sues Kalshi Coinbase Polymarket Robinhood and Crypto.com Over Illegal Sports Betting Claims

The state of Wisconsin has filed a sweeping lawsuit against Kalshi, Coinbase, Polymarket, Robinhood, and Crypto.com, accusing them of facilitating illegal sports betting through prediction markets, escalating the growing legal battle between states and crypto-linked trading platforms. The lawsuit, led by Attorney General Josh Kaul, claims these companies are offering event-based contracts that function as unlicensed gambling under Wisconsin law, despite being framed as financial products.

State Claims Prediction Markets Are Illegal Gambling

At the center of the case is Wisconsin’s argument that sports-related prediction contracts are effectively bets, not financial instruments. Officials say users are wagering money on outcomes like sporting events for profit, which meets the legal definition of gambling in the state. The lawsuit specifically targets platforms that allow users to trade contracts tied to real-world outcomes, arguing that these services:

• Operate without proper gambling licenses
• Bypass state-level regulatory frameworks
• Expose consumers to unregulated betting environments

Platforms Argue Federal Oversight Applies

Companies named in the lawsuit are pushing back, claiming their services are regulated at the federal level, not by individual states. Firms like Robinhood and Kalshi argue that their event contracts fall under the jurisdiction of the Commodity Futures Trading Commission (CFTC), which oversees derivatives markets.

This sets up a direct legal conflict between:

• State regulators, who view prediction markets as gambling
• Federal authorities and platforms, who view them as financial derivatives

Part of a Nationwide Crackdown on Prediction Markets

Wisconsin is not acting alone. The lawsuit is part of a broader wave of enforcement across the U.S.Recent actions show multiple states are targeting similar platforms, arguing they blur the line between investing and gambling. At the same time, federal agencies like the CFTC are pushing back, claiming exclusive authority over these markets, creating a growing jurisdictional battle.