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 decision to sue Coinbase and Gemini over alleged violations of state gambling laws through their prediction market contracts. Similarly, New York had previously targeted Kalshi, demanding that it shut down its sports wagering platform. The CFTC, as the federal derivatives regulator, claims that states lack the authority 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 is supported by the growing industry the agency seeks to protect. However, a group of 37 state attorneys general, including New York's Letitia James, has countered with a legal brief arguing that this preemption theory poses a threat to states' ability to safeguard their citizens. CFTC Chairman Mike Selig has made this initiative a priority since taking office, with the agency also suing Arizona, Connecticut, and Illinois over event contracts deemed derivatives instruments within federal jurisdiction. In response to the lawsuit, New York Attorney General Letitia James and Governor Kathy Hochul stated that they are enforcing state laws on gambling to protect consumers, emphasizing that they will hold accountable any gambling platforms, including prediction markets, that violate these laws.