US Regulator Takes New York to Court Over Prediction Market Dispute

In its latest move to assert nationwide regulatory control over prediction market firms, the US Commodity Futures Trading Commission has filed a lawsuit against New York. This action follows the state's own lawsuit against Coinbase and Gemini, alleging that their prediction market contracts breached state gambling laws, as well as a similar case against Kalshi last year. The CFTC maintains that, as the federal derivatives regulator, it has exclusive jurisdiction over commodity futures, options, and swaps traded on federally regulated exchanges, thereby preempting state law. However, a group of 37 state attorneys general, including New York's Letitia James, has countered this stance by signing a legal brief that argues Kalshi's preemption theory poses a threat to states' ability to protect their citizens. This lawsuit is part of a broader initiative by CFTC Chairman Mike Selig, who has also taken Arizona, Connecticut, and Illinois to court over similar issues, asserting that event contracts fall under federal jurisdiction as derivatives instruments.