Prediction Market Lawsuits Advance in Wisconsin, Rhode Island, Illinois, and New Mexico
The latest filings include requests for preliminary injunctions, a motion to stay proceedings, and a motion to change venue.
Prediction market litigation advanced in four states this week as Wisconsin sought a preliminary injunction, Illinois moved to stay the CFTC’s federal challenge, Polymarket filed a motion for a preliminary injunction in Rhode Island, and Kalshi removed New Mexico’s lawsuit to federal court.
The developments come as courts across the country continue to weigh on whether the Commodity Exchange Act (CEA) preempts state gambling laws in relation to event contracts offered by prediction markets.
Wisconsin Seeks Preliminary Injunction; Robinhood Pushes Transfer
Wisconsin filed a motion for a preliminary injunction seeking to block Kalshi, Robinhood, Coinbase, and related entities from offering sports event contracts in the state.
The state argues that the companies are facilitating illegal sports betting and violating state gambling laws. The filing challenges the industry’s preemption arguments, contending that the CEA does not preempt Wisconsin’s gambling laws. It also argues that sports event contracts do not qualify as swaps under federal law.
Wisconsin notes that it seeks the injunction only if the court denies its pending motion to remand the case back to state court. If granted, the injunction would prohibit the companies from offering sports event contracts in Wisconsin while litigation proceeds.
The following day, Robinhood filed a reply supporting its motion to transfer the case to the Eastern District of Wisconsin, where the CFTC’s lawsuit against the state is already pending.
Robinhood argued that both cases involve the same preemption questions and should proceed before the same court. The company also contended that the Eastern District is likely to reach the merits sooner because briefing in the federal government’s case is further advanced.
According to the filing, the parties agree that the state case and the CFTC’s lawsuit should proceed in the same district, leaving the venue dispute as the primary issue before the court.
Polymarket Seeks Preliminary Injunction in Rhode Island
In Rhode Island, Polymarket joined Kalshi and the CFTC and filed a motion for a preliminary injunction to block the state from enforcing its state gambling laws against the prediction market platform while litigation proceeds.
Polymarket contends that federal law preempts the state’s enforcement action. The company argues that Rhode Island’s lawsuit exposes the company to potential penalties, disrupts its federally authorized operations, and undermines user trust and goodwill.
Polymarket asked the court to preserve the status quo while the broader jurisdictional dispute is resolved.
The motion follows last week’s consolidation of Rhode Island’s enforcement action against Kalshi and Polymarket with Kalshi’s separate federal lawsuit challenging the state’s efforts to regulate event contracts.
Illinois Requests Stay Pending Coinbase Decision
In Illinois, state officials moved to stay the CFTC’s lawsuit challenging the state’s prediction market restrictions.
Illinois argued the case raises the same legal questions currently before the court in Coinbase’s lawsuit against state officials. Those include whether sports event contracts qualify as swaps under the CEA and whether federal law preempts state gambling laws.
Illinois noted that the Coinbase case has already been fully briefed and argued. Those developments make it more efficient to await that ruling before proceeding with the CFTC challenge.
The filing noted that courts across the country remain divided on the issue. There are currently appeals pending in multiple federal circuits.
Illinois also stated that it is not currently enforcing state laws against prediction markets, pending the Coinbase preliminary injunction request.
Kalshi Removes New Mexico Lawsuit to Federal Court
Meanwhile, in a common procedural step, Kalshi removed New Mexico’s lawsuit from the state court to the federal court.
In its removal notice, Kalshi argued that the state’s claims raise federal questions because they require courts to determine whether event contracts are swaps subject to the CEA and the CFTC’s exclusive jurisdiction.
Kalshi further noted that similar preemption disputes are currently standing before multiple federal courts across the country. Those include cases brought by the CFTC and the Department of Justice against several states.
New Mexico will likely seek remand. Nevada, Washington, and Massachusetts have successfully returned similar enforcement actions to state court after operators attempted removal.
https://www.gamblinginsider.com/news/166391/prediction-market-lawsuits-wisconsin-rhode-island-illinois-new-mexico