US Regulator Challenges New York in Ongoing Dispute Over Prediction Markets

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 sued major cryptocurrency exchanges Coinbase and Gemini, alleging that their prediction market contracts breached state gaming laws. The state had previously targeted Kalshi, demanding that it shut down its sports betting platform. The CFTC, as the primary 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. As a result, state laws are effectively superseded. However, a coalition of 37 state attorneys general, including New York's Letitia James, has filed a legal brief arguing that this stance threatens the states' ability to protect their citizens. CFTC Chairman Mike Selig has made this initiative a top priority, with the agency also suing Arizona, Connecticut, and Illinois over similar issues. In response to the lawsuit, New York officials stated that they are enforcing state gaming laws to safeguard consumers, emphasizing that they will hold accountable any gambling platforms, including prediction markets, that violate these laws.