US Regulator CFTC Takes New York to Court Over Prediction Markets

In a recent development, the US Commodity Futures Trading Commission has filed a lawsuit against New York, marking the latest move in a series of actions aimed at protecting its nationwide regulatory authority over prediction market firms. This comes after New York took legal action against cryptocurrency exchanges Coinbase and Gemini, alleging that their prediction market contracts breached state gambling laws. The state had previously targeted Kalshi, demanding the cessation of its sports wagering platform. The CFTC, as the federal derivatives regulator, maintains that states have no authority to interfere with these firms, arguing that federal law grants it exclusive jurisdiction over commodity futures, options, and swaps traded on federally regulated exchanges. This stance effectively preempts state law, aligning with the positions of 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 claim in a legal brief, arguing that Kalshi's preemption theory poses a threat to states' ability to safeguard their citizens. CFTC Chairman Mike Selig has prioritized this initiative, with the agency having also sued Arizona, Connecticut, and Illinois, asserting that event contracts fall under federal jurisdiction as derivatives instruments. In response to the lawsuit, New York Attorney General Letitia James and Governor Kathy Hochul stated that they are enforcing state laws on gambling, emphasizing their commitment to protecting consumers and upholding New York's laws, which are designed to safeguard individuals engaging in prediction markets or casino activities.