Wisconsin sues Kalshi, Polymarket, others over sports event contracts

Wisconsin’s top law enforcement official has sued a group of fintech and crypto platforms, including Kalshi, Robinhood, Coinbase, Polymarket and Crypto.com, accusing them of facilitating illegal sports betting by offering “event contracts,” according to complaints filed April 23 in Dane County.

Attorney General Josh Kaul is seeking preliminary and permanent injunctions to block the companies from offering sports-related markets to customers in Wisconsin and to have a court declare the operations unlawful under state gambling law and a public nuisance.

The case adds to a growing clash between state gambling laws and federally regulated prediction markets, as regulators and courts across the United States debate whether event contracts are financial instruments or illegal wagers.

The complaints argue that, except in narrow circumstances, sports betting and most forms of commercial gambling have long been illegal in Wisconsin and that changing the label to “event contracts” does not alter the underlying activity.

Wisconsin DOJ sues to stop alleged illegal sports betting. Source: Wisconsin DOJ

According to the filings, the platforms list contracts that “pay out money based on the outcome of real-world events,” while charging a fee for each trade and generating revenue from Wisconsin users in violation of state law. The suits highlight Kalshi in particular, asserting that sports contracts account for almost 90% of its business and citing estimates that annualized revenue from those products is more than $1 billion.

State pressure widens beyond Wisconsin

The Wisconsin action lands amid a widening patchwork of state-level enforcement against similar products, as federal regulators wrestle with how to classify them.

On April 3, a Nevada judge extended an order blocking Kalshi from offering sports markets to customers there, treating them as unlicensed gambling, while authorities in Arizona have pursued enforcement actions targeting the company’s sports-related contracts.

Related: After Kalshi appeal, prediction markets fight could head to US Supreme Court

In some instances, the Commodity Futures Trading Commission (CFTC) and the US Department of Justice (DoJ) have backed arguments that certain event contracts fall within the federal derivatives framework rather than state gambling codes, yet state regulators and attorneys general have moved in the opposite direction.

That divergence has sharpened as courts begin to weigh in. Kalshi secured a favorable federal appellate ruling on April 6, narrowing New Jersey’s ability to enforce its gambling laws against certain CFTC-regulated sports contracts.

The pressure on Robinhood, Coinbase, Polymarket and Crypto.com has been mounting as well, beyond Wisconsin. In January, Tennessee’s sports betting regulator sent cease‑and‑desist letters to Kalshi, Polymarket and Crypto.com, ordering them to halt sports event contracts for state residents, void existing wagers and refund local users after accusing the firms of offering unlicensed sports wagering products.

Robinhood and Coinbase, meanwhile, have leaned into event contracts through non-exclusive distribution deals with Kalshi that route their users’ orders onto its prediction markets.

Robinhood’s hub for trading event contracts has processed billions of dollars in volume, and enabled customers to bet on outcomes spanning sports, macro data and politics, while Coinbase’s Kalshi-powered prediction markets similarly let users trade on real-world outcomes across all 50 states, drawing scrutiny from New York’s attorney general and other state enforcers.

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