A federal judge has refused to block Wisconsin from enforcing its gambling laws against companies offering sports-related event contracts, handing the state an early victory against the US Commodity Futures Trading Commission (CFTC) in a closely watched legal battle over prediction markets.

In a 28-page decision, U.S. District Judge William C. Griesbach denied the CFTC’s request for a preliminary injunction. He concluded the agency “has failed to show a likelihood of success on the merits” and also failed to establish irreparable harm or show that “the balance of equities favors it.”

The lawsuit centers on whether sports-related event contracts offered through federally regulated prediction markets should be treated exclusively as financial derivatives under the Commodity Exchange Act or whether Wisconsin can regulate them as illegal gambling under state law.

Wisconsin launched civil enforcement actions in April against Coinbase, Kalshi, Robinhood, Polymarket and Crypto.com. The state alleges the companies are facilitating unlawful sports betting by offering sports-related event contracts to Wisconsin residents.

In its original complaint, Wisconsin argued that sports betting remains illegal in the state except through certain tribal gaming operations. It accused Kalshi, Robinhood and Coinbase of working together to facilitate what it described as illegal sports wagering through prediction markets while disguising the products as financial trading. State lawyers also cited examples involving NCAA men’s basketball tournament contracts, arguing they functioned like traditional sportsbook wagers because winning contracts paid out while losing positions expired worthless.

Judge says Wisconsin likely has authority over the CFTC to keep enforcing gambling laws

Before addressing the core dispute, Griesbach rejected several procedural challenges. He denied Wisconsin’s request to move the case to the Western District of Wisconsin and dismissed the state’s argument that the federal government lacked standing. The judge concluded the CFTC had sufficiently alleged that Wisconsin’s enforcement efforts interfere with federal regulatory objectives, writing that “this is enough to confer standing on the federal government.”

The court also denied requests by Kalshi and Crypto.com’s derivatives business to intervene as plaintiffs, along with a motion by the American Gaming Association to intervene as a defendant. Griesbach found the existing parties adequately represented their interests and that additional parties could complicate or delay the litigation.

On the central legal issue, the judge expressed skepticism about the CFTC’s interpretation of federal commodities law. He wrote that the agency “has not shown that it is likely to prevail on its argument that the CEA’s definition of ‘swaps’ covers the event contracts offered by entities such as Kalshi.”

Griesbach also found the agency was unlikely to succeed on its broader argument that federal law preempts Wisconsin’s gambling restrictions. He said there was no clear indication Congress intended to strip states of their traditional authority to regulate gambling.

The opinion further rejected the CFTC’s claim that Wisconsin law conflicts with federal regulations. According to the court, companies can comply with both legal regimes because federal law permits—but does not require—the offering of the contracts. “There is no implied conflict preemption if there is no conflict,” the judge wrote.

The judge also concluded the CFTC had not demonstrated irreparable harm. Although companies offering the contracts could face financial consequences from Wisconsin’s enforcement actions, he found the federal regulator itself had not shown the type of injury needed to justify the “extraordinary remedy” of a preliminary injunction.

Griesbach said the balance of equities favored Wisconsin because of the state’s interest in exercising “its traditional police powers” to address gambling-related harms, including gambling addiction.

The ruling allows Wisconsin to continue pursuing its enforcement actions while the case moves forward. It also comes as the state takes an increasingly aggressive approach toward prediction markets. Earlier this month, the Wisconsin Elections Commission warned residents they cannot legally bet on an election and vote in that same contest under state law, prompting constitutional objections from Kalshi. Separately, Gov. Tony Evers signed an executive order restricting executive branch employees from using confidential government information to profit from prediction markets.

In the concluding section of the opinion, Griesbach wrote that “because the CFTC has failed to show that it is likely to prevail on the merits of its argument, that it will suffer irreparable harm, or that the balance of equities favors it, its motion for a preliminary injunction … is DENIED.” The court directed the clerk to schedule a Rule 16 conference to set the next stages of the litigation.

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