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 earlier lawsuit against Coinbase and Gemini, alleging that their prediction market contracts contravened state gambling laws. New York had also previously targeted Kalshi, demanding that it discontinue its sports wagering platform. The CFTC, as the federal derivatives regulator, claims that states have no 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 signed 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 similar issues. The regulator claims that CFTC-registered exchanges face an onslaught of state lawsuits seeking to limit access to event contracts and undermine the CFTC's regulatory jurisdiction. In response to the lawsuit, New York Attorney General James and Governor Kathy Hochul stated that they are enforcing state laws on gambling, prioritizing consumer protection and holding gambling platforms accountable for violating state laws.