US Regulator CFTC Takes New York to Court Over Prediction Market Dispute

The US Commodity Futures Trading Commission has filed a lawsuit against New York, marking its latest move to assert the agency's nationwide regulatory authority over prediction market firms. This action comes after New York recently sued cryptocurrency exchanges Coinbase and Gemini, alleging that their prediction market contracts breached state gambling laws, and previously targeted Kalshi, demanding the cessation of its sports betting platform. The CFTC, as the federal derivatives regulator, claims that states have no right to interfere with these firms, citing federal law that grants the agency 'exclusive jurisdiction' over commodity futures, options, and swaps traded on federally regulated exchanges. This stance implies that state law is superseded, aligning with the regulator's and the growing industry's positions. However, a group of 37 state attorneys general, including New York's Letitia James, have countered this claim in a legal brief supporting a case in Massachusetts, arguing that the preemption theory posed by firms like Kalshi threatens the states' ability to protect their citizens. CFTC Chairman Mike Selig has prioritized this initiative since assuming leadership of the agency, with similar lawsuits filed against Arizona, Connecticut, and Illinois, asserting that event contracts are derivatives subject to federal jurisdiction. According to Chairman Selig, 'CFTC-registered exchanges have faced numerous state lawsuits seeking to restrict Americans' access to event contracts and undermine the CFTC's regulatory authority over prediction markets.'