Wisconsin has become the latest U.S. state to take legal aim at the prediction market industry, filing three lawsuits on April 23, 2026, against Kalshi, Robinhood, Coinbase, Polymarket, Crypto.com, and their affiliates.
The state alleges these platforms are facilitating illegal sports betting through federally regulated financial contracts. The action arrives the same day a U.S. Army soldier was arrested for using classified intelligence to profit on Polymarket, placing the sector under scrutiny.
What Wisconsin Is Claiming
The Wisconsin Department of Justice, led by Attorney General Josh Kaul, structured its complaints around three corporate ecosystems. The first targets Kalshi alongside Coinbase and Robinhood, both of which route prediction market orders through Kalshi’s platform.
The second names Polymarket and related entities. The third targets Crypto.com and its derivatives arm. All three filings rest on the same theory: sports-related event contracts are functionally indistinguishable from ordinary sports bets, and Wisconsin law bans commercial sports betting outside tribal casinos.
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The state is not pursuing monetary damages as its primary goal. Kaul wants the court to declare the platforms in violation of state statute, issue injunctions blocking sports contracts for Wisconsin users, and recover civil forfeitures.
Kalshi reportedly generates over one billion dollars annually from sports contracts, representing close to ninety percent of its total estimated revenue. The filings argue that collecting a fee on each contract, a model the state likens to a casino taking a cut of every wager, constitutes unlawful commercial gambling.
Wisconsin also turns the companies’ own words against them. Kalshi’s advertising has described its platform as the first nationwide legal sports betting platform, while Polymarket’s copy calls it a platform where people can bet on outcomes of future events. “Thinly disguising unlawful conduct doesn’t make it lawful,” Kaul said. “These companies’ alleged facilitation of sports betting in Wisconsin should be shut down.”
A Growing State-Level Offensive
Wisconsin did not act alone. Its filings arrived days after New York Attorney General Letitia James sued Coinbase and Gemini separately, seeking over two billion dollars from Coinbase and one billion from Gemini.
New York and Illinois also issued executive orders barring state employees from trading on prediction platforms, citing concerns about insiders exploiting confidential information. In March 2026, a ruling was made by Ohio courts that Kalshi’s products could be classified as gambling products under state law. The same month, criminal prosecution against the company commenced by Arizona prosecutors.
This legal issue actually relates to the expansion of Kalshi into sports contracts in the early parts of 2025. Kalshi built a federally licensed exchange that got Designated Contract Market status from the Commodity Futures Trading Commission (CFTC) in 2020.
It won a landmark court battle in 2024 when a federal judge ruled its election-based contracts did not constitute illegal gambling under the Commodity Exchange Act. That cleared the path for sports markets, and immediately triggered state regulators who argued CFTC registration does not override their authority over gambling.
The Soldier and the Prediction Market
The pressure on the industry deepened when the DOJ announced the arrest of Master Sergeant Gannon Ken Van Dyke on the same day Wisconsin filed its suits. According to prosecutors, Van Dyke helped plan and execute Operation Absolute Resolve, the covert raid that captured Venezuelan President Nicolás Maduro on January 3, 2026.
Knowing the operation was imminent, he allegedly opened a Polymarket account in late December 2025 and placed about thirty-three thousand dollars across thirteen trades, all betting Maduro would be removed and U.S. forces would enter Venezuela by January 31.
After the raid succeeded, those contracts settled in his favour, netting him roughly four hundred and nine thousand dollars. Prosecutors allege he transferred proceeds to a foreign cryptocurrency vault and asked Polymarket to delete his account.
Polymarket said it identified the trades, referred the case to the DOJ, and cooperated. The case is considered the first DOJ prosecution of insider trading on a prediction market.
Platforms Push Back
Coinbase Chief Legal Officer Paul Grewal argued on X that Congress designed derivatives markets to operate under a single federal framework and that state enforcement recreates the regulatory fragmentation lawmakers sought to prevent.
Kalshi has argued the designation places federal regulators in exclusive jurisdiction over its contracts, pre-empting state gaming laws. The CFTC supported that position, filing an amicus brief in support of Kalshi and separately suing Illinois in April 2026, arguing federal law preempts state crackdowns.
With courts divided, legal observers generally expect the dispute to reach the U.S. Supreme Court, where a ruling on whether the Commodity Exchange Act pre-empts state gambling law would settle the question for all fifty states.
