Wisconsin officials have launched legal action against several online platforms, accusing them of offering sports betting services that violate state law. The lawsuits, filed by Attorney General Josh Kaul, target companies that operate prediction markets, where users can place money on the outcomes of various events.

The state filed three separate complaints in Dane County circuit court, naming companies such as Kalshi, Robinhood, Coinbase, Polymarket, and Crypto.com, along with affiliated entities. According to the filings, these platforms allow users to engage in transactions tied to sports results, which the state considers unlawful gambling activity.

State Challenges “Event Contracts” Model

Prediction markets enable users to speculate on outcomes ranging from political elections to global events and sporting contests. Participants purchase contracts tied to specific outcomes, with payouts determined by whether the prediction proves correct.

The companies involved argue that these transactions are not bets but financial instruments. They describe their offerings as “event contracts,” positioning them as regulated trading products rather than gambling. However, Kaul rejected that interpretation.

“No company is above this law. No matter how creatively, those companies try to disguise the activity that they’re engaged in,” Kaul said, according to FOX6 News Milwaukee. “These companies have chosen to flout Wisconsin law by this, thinly disguising the sports betting that they facilitate through what are called event contracts. But our position in this case is that event contracts are no different than ordinary sports bets.”

In another statement, Kaul emphasized the state’s objective: “We are taking action, to uphold Wisconsin law and, ultimately, seeking to shut down the sports gambling operations that we allege that those companies are engaging in Wisconsin.”

Court documents (pdf) describe the transactions offered by these platforms as comparable to traditional wagers. For example, one filing explains how users could purchase contracts tied to a college basketball game outcome, with prices reflecting implied probabilities. If the predicted team won, contract holders received a payout, while others received nothing.

“These companies have chosen to flout Wisconsin law by thinly disguising the sports betting that they facilitate through what are called event contracts,” Kaul explained. “But our position in this case is that event contracts are no different than ordinary sports bets. The companies collect a fee, we allege, for every bet that’s made, leading them to earn significant revenue from Wisconsinites through violations of our state’s gambling regulations.”

Legal Context and Broader Developments

Wisconsin law currently permits sports betting only under limited conditions. Since 2021, wagers have been allowed exclusively at tribal casinos. A recently signed law expands the possibility of online sports betting, but only if servers are located on tribal land and compacts are renegotiated with state and federal approval.

State officials said the lawsuits are unrelated to that legislation. “The allegations would be the same whether or not there had been the new legislation passed,” Kaul said.

The legal action comes amid rapid growth in prediction markets. Reports indicate that these platforms collectively generate billions of dollars in monthly transactions, with a large share linked to sports-related outcomes. Wisconsin joins other states, including New York, that have taken steps to regulate or challenge these services.

Kaul noted that the state acted in response to a surge in activity. “There has been a huge increase in this type of activity that we allege is occurring in recent years, and that has a number of consequences.”

The lawsuits seek court orders declaring the platforms in violation of Wisconsin law and requesting injunctions to block their operations within the state. While the state is not currently pursuing financial penalties, officials indicated that such action could be considered if supported by evidence.

Companies Push Back on Claims

The companies named in the lawsuits have disputed Wisconsin’s interpretation, arguing that their services fall under federal oversight rather than state gambling laws.

A spokesperson for Robinhood stated, “As we’ve previously shared, Robinhood’s event contracts are federally regulated by the CFTC (Commodity Futures Trading Commission) and offered through Robinhood Derivatives, LLC, a CFTC-registered entity, allowing retail customers to access prediction markets in a safe, compliant, and regulated manner. We intend to defend ourselves against these claims.”

Kalshi also defended its position, saying, “As other courts have recognized, Kalshi is a regulated, nationwide exchange for real-world events, and it is subject to exclusive federal jurisdiction. It’s very different from what state-regulated sportsbooks and casinos offer their customers. We are confident in our legal arguments.”

Coinbase Chief Legal Officer Paul Grewal raised concerns about inconsistent regulation, stating, “Congress was clear — consumers deserve uniform, federal oversight over derivatives markets. As the Third Circuit held, state enforcement that seeks to prohibit markets — like Wisconsin’s lawsuit today against Coinbase and others — ‘is exactly the patchwork that Congress replaced wholecloth by creating the CTFC.’”