CFTC’s Wisconsin Loss Over Kalshi Sports Contracts Moves to Seventh Circuit

The CFTC’s attempt to block Wisconsin from enforcing gambling laws against prediction market operators is now before the Seventh Circuit after U.S. District Judge William C. Griesbach denied the agency’s preliminary-injunction request. The July 28 order, entered July 29, left Wisconsin free of a federal injunction while the appeals proceed.

The ruling did not decide Wisconsin’s enforcement cases against Kalshi, Polymarket, Robinhood, Coinbase and Crypto.com on the merits. It did reject, at the preliminary stage, the federal regulator’s bid to stop the state from pursuing its gambling-law theory while courts sort out whether sports event contracts are federally regulated derivatives, state-regulated gambling products, or both.

The CFTC filed a notice of appeal on Aug. 7, according to the Eastern District of Wisconsin docket. The Seventh Circuit opened the federal plaintiffs’ appeal as United States v. Wisconsin, No. 26-2636, on Aug. 10. Kalshi filed its own notice of appeal on Aug. 13 after Griesbach denied its motion to intervene, and the Seventh Circuit opened KalshiEX LLC v. Wisconsin, No. 26-2675, on Aug. 14. The American Gaming Association also appealed the denial of its intervention motion, with its appeal docketed as No. 26-2696.

What did Judge Griesbach decide?

In United States of America and Commodity Futures Trading Commission v. State of Wisconsin, Case No. 26-C-749, Griesbach denied the CFTC’s motion for a preliminary injunction because the agency had not shown a likelihood of success on the merits. The 28-page order also denied Wisconsin’s motions to dismiss and transfer venue, denied intervention motions by Kalshi and North American Derivatives Exchange, and denied the American Gaming Association’s motion to intervene.

The central legal question was whether sports-related event contracts are “swaps” under the Commodity Exchange Act and whether that federal framework preempts Wisconsin’s gambling statutes. The CFTC argued that sports event contracts listed on federally regulated markets fall within its exclusive authority. Wisconsin argued that the products function as sports betting and can be reached by state gambling law.

Griesbach sided with Wisconsin for purposes of preliminary relief. The order said Wisconsin’s commercial gambling statute “would seem to fall well within” the conduct at issue and found that the CFTC had not shown it was likely to prevail on its argument that the CEA’s swap definition covers sports event contracts offered by entities such as Kalshi. The court also rejected the CFTC’s preemption argument, writing that Wisconsin’s gambling statutes do not conflict with federal commodities regulations.

That is not a final merits ruling. A preliminary-injunction decision asks whether the moving party has made the required early showing for emergency relief. The practical effect is still significant: there is no district court injunction in the CFTC case preventing Wisconsin from pressing its gambling-law theory against the platforms.

What is Wisconsin accusing the platforms of doing?

Wisconsin initiated civil enforcement actions on April 23 against various designated contract markets and futures commission merchants, including Coinbase, Kalshi, Robinhood, Polymarket and Crypto.com, according to Griesbach’s July order. The state alleges the companies allow customers in Wisconsin to trade event contracts based on sports outcomes in violation of Wis. Stat. § 945.03, the state’s commercial gambling law.

The state’s enforcement complaints seek declarations that the defendants are violating Wisconsin law and causing a public nuisance. Wisconsin also seeks preliminary and permanent injunctions barring them from offering sports-related event contracts for trading in the state.

Those actions began in Dane County Circuit Court but were removed to the U.S. District Court for the Western District of Wisconsin. Griesbach’s order stated that motions to remand them to state court were pending there. A Sept. 8 minute entry in the Eastern District case likewise noted that the remand and preliminary-injunction motions remained pending in the Western District of Wisconsin.

That procedural posture matters because the CFTC case is separate from Wisconsin’s enforcement suits. Griesbach was deciding whether the federal government could enjoin Wisconsin enforcement, not whether Kalshi, Polymarket, Robinhood, Coinbase or Crypto.com ultimately violated state gambling law.

Why did the CFTC sue Wisconsin?

The CFTC and the United States sued Wisconsin on April 28, one week after the state’s enforcement actions, according to the Eastern District docket. The complaint named Wisconsin, Kaul, Gov. Tony Evers, the Wisconsin Department of Administration Division of Gaming and Division of Gaming Administrator John Dillett. Evers, the Division of Gaming and Dillett were later dismissed without prejudice by stipulation, leaving Wisconsin and Kaul as defendants.

The agency’s complaint alleged that Wisconsin’s attempt to shut down federally regulated markets intruded on the CFTC’s exclusive jurisdiction over commodity futures, options and swaps traded on federally regulated exchanges. Griesbach found those allegations enough to support federal standing at the pleading stage, so he denied Wisconsin’s motion to dismiss.

But standing was not enough for emergency relief. On the preliminary-injunction motion, the court found that the CFTC had not shown the sports event contracts were likely swaps or that federal law likely displaced Wisconsin gambling enforcement. Griesbach also noted that the entities most likely to suffer economic harm from state enforcement were the regulated platforms themselves, not the CFTC.

Which appeals are now before the Seventh Circuit?

The CFTC’s Aug. 7 notice of appeal says the agency is appealing the decision and order denying its preliminary-injunction motion, entered July 29. That appeal is docketed in the Seventh Circuit as No. 26-2636. Kalshi’s Aug. 13 notice of appeal challenges the same decision and order, including the denial of its intervention motion, and is docketed as No. 26-2675.

The American Gaming Association is also in the appellate stack. Its appeal, No. 26-2696, follows Griesbach’s denial of AGA’s attempt to intervene in the district court case. Together, the appeals put both the CFTC’s injunction loss and the intervention rulings before the Seventh Circuit.

In the district court, discovery is stayed pending resolution of the federal plaintiffs’ appeal and any later appeals, and all upcoming deadlines have been suspended. The Eastern District’s public case page states that the case was administratively closed on Sept. 9 pending a decision from the Seventh Circuit. Administrative closure does not end the case. It pauses district court management while the appeal controls the next legal move.

What is the Ho-Chunk Nation case about?

Wisconsin has a second prediction-market fight in federal court. In Ho-Chunk Nation v. Kalshi Inc., Case No. 25-cv-698, the Ho-Chunk Nation sued Kalshi and Robinhood entities in the Western District of Wisconsin, alleging that sports event contracts amounted to unlawful gaming on tribal land under the Indian Gaming Regulatory Act.

U.S. District Judge William M. Conley issued a mixed May 11 order. He allowed the Nation’s IGRA theory against Kalshi to proceed, dismissed Robinhood Derivatives LLC and Robinhood Markets Inc. as defendants, dismissed the Lanham Act and RICO claims, and denied the Nation’s motion for preliminary injunctive relief.

Conley’s order treated the IGRA question as serious, but it did not grant the Nation an injunction. The court denied preliminary relief after concluding that the Nation had not shown irreparable harm. On Sept. 11, Conley certified the May order for interlocutory appeal under 28 U.S.C. § 1292(b), denied the Nation leave to amend its complaint, and stayed proceedings while the certified legal questions go to the Seventh Circuit if defendants seek appellate permission expeditiously.

How does this fit the national fight over sports event contracts?

The Wisconsin cases sit inside a broader conflict over whether sports event contracts are federally regulated derivatives, state-regulated gambling, or both depending on the claim and forum. Appellate courts have not answered that question uniformly, and the split now gives the Seventh Circuit a live role in the industry’s central legal fight.

Griesbach’s order acknowledged the Third Circuit’s contrary ruling in KalshiEX LLC v. Flaherty, where a divided panel concluded that sports-related event contracts fall within the CEA’s definition of swap. Griesbach found other district court analyses more persuasive at the preliminary stage and said the CFTC had not shown likelihood of success in Wisconsin.

The appellate landscape shifted again on Sept. 25, when the Sixth Circuit issued its decision in KalshiEX LLC v. Schuler and KalshiEX LLC v. Orgel. The Sixth Circuit held that Kalshi had not shown its sports-event contracts satisfy the CEA definition of a swap, adding another appellate ruling on the same statutory question now before the Seventh Circuit.

The tribal-law front is also moving quickly. On Sept. 16, the Ninth Circuit issued a published decision in Blue Lake Rancheria v. Kalshi, Inc., affirming in part and reversing in part a California district court order that had denied tribal plaintiffs a preliminary injunction. The Ninth Circuit held that the tribes were likely to succeed on their IGRA claim while affirming the refusal to enjoin Kalshi’s advertising under the Lanham Act.

For prediction market operators, the immediate Wisconsin stakes are procedural but concrete. The next move is in the Seventh Circuit, where the CFTC’s No. 26-2636 appeal, Kalshi’s No. 26-2675 appeal and AGA’s No. 26-2696 appeal will determine whether Griesbach’s July 29 order remains the controlling district-court ruling while Wisconsin’s enforcement cases and the Ho-Chunk Nation litigation stay tied to federal appellate review.