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The Wisconsin State Statutes do not prevent people from riding bikes with headphones on. Many people consider riding with headphones on unsafe. Many organized rides, triathlons, and even some running races ban headphones for saftey reasons. Since traffic noise is already quite loud, bikers sometimes have to have the volume of their headphones pretty high.
Maybe even more dangerous than listening to music is a biker adjusting his volume, dialing on an iphone, or changing stations etc. Some bikers may even choose to text while biking. Unlike driving a motor vehicle, the Wisconsin statutes do not prevent bikers from texting while biking. Similarly, the inattentive driving statute specifically applies to "motor" vehicles, see below. Keep in mind that cities/municpalities can create their own ordinances. Thus, your city may have a local rule against wearing headphones while riding.
346.89 Inattentive driving. (1) No person while driving a motor vehicle shall be so engaged or occupied as to interfere with the safe driving of such vehicle. 346.89 (3) (a) No person may drive, as defined in s. 343.305 (1) (b), any motor vehicle while composing or sending an electronic text message or an electronic mail message.