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 comes after New York recently took legal action against cryptocurrency exchanges Coinbase and Gemini, alleging their prediction market contracts breached state gambling laws. The state had also 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 it exclusive jurisdiction over commodity futures, options, and swaps traded on federally regulated exchanges. However, 37 state attorneys general, including New York's Letitia James, have countered this claim in a legal brief supporting Kalshi's case in Massachusetts, arguing that the regulator's stance on preemption undermines states' ability to protect their citizens. CFTC Chairman Mike Selig has made this a priority since taking office, with the agency also suing Arizona, Connecticut, and Illinois over event contracts being classified as derivatives within federal jurisdiction. Selig stated that CFTC-registered exchanges face numerous state lawsuits attempting to restrict access to event contracts and undermine the CFTC's regulatory authority over prediction markets. In response, New York Attorney General James and Governor Kathy Hochul asserted their commitment to enforcing state gambling laws, emphasizing the need to protect consumers and hold accountable any gambling platforms, including prediction markets, that violate these laws.