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. The state had recently taken legal action against Coinbase and Gemini, alleging that their prediction market contracts breached local gambling laws. Last year, New York also targeted Kalshi, demanding that it discontinue 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 it exclusive jurisdiction over commodity futures, options, and swaps traded on federally regulated exchanges. This stance effectively preempts state law, according to the regulator and the growing industry it seeks to protect. However, a group of 37 state attorneys general, including New York's Letitia James, has countered this position in a legal brief, arguing that Kalshi's preemption theory threatens the states' ability to safeguard their citizens. The CFTC Chairman has made this initiative a top priority since taking office, with the agency also suing Arizona, Connecticut, and Illinois over event contracts being classified as derivatives within federal jurisdiction. In response to the lawsuit, New York Attorney General James and Governor Kathy Hochul stated that they are enforcing state gambling laws to protect consumers, emphasizing that they will hold accountable any gambling platforms, including prediction markets, that violate these laws.