US Regulator Takes New York to Court Over Prediction Market Dispute

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 Coinbase and Gemini, alleging that their prediction market contracts breached state gambling laws, and previously targeted Kalshi, demanding that it cease operations of its sports wagering platform. The CFTC, as the federal derivatives regulator, has asserted that states lack the authority 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. Consequently, state law is deemed preempted. However, a group of 37 state attorneys general, including New York's Letitia James, has countered with a legal brief arguing that this stance threatens the states' ability to safeguard their citizens. CFTC Chairman Mike Selig has prioritized this initiative, with the agency also taking similar action against Arizona, Connecticut, and Illinois. The dispute revolves around the classification of event contracts as derivatives instruments within federal jurisdiction. Chairman Selig emphasized that CFTC-registered exchanges face numerous state lawsuits attempting to restrict access to event contracts and undermine the agency's regulatory authority. In response, New York Attorney General James and Governor Kathy Hochul stated that they are enforcing state laws on gambling, prioritizing consumer protection and holding accountable gambling platforms that violate these laws.