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 wagering platform. The CFTC maintains that, as the federal derivatives regulator, it has exclusive jurisdiction over commodity futures, options, and swaps traded on federally regulated exchanges, thereby preempting state law. However, a group of 37 state attorneys general, including New York's Letitia James, has countered this stance in a legal brief supporting the states' right to protect their citizens. CFTC Chairman Mike Selig has prioritized this initiative, with the agency also suing other states such as Arizona, Connecticut, and Illinois over similar issues. In response to the lawsuit, New York Attorney General James and Governor Kathy Hochul stated they are upholding state laws on gambling, prioritizing consumer protection and promising to hold accountable any gambling platforms, including prediction markets, that violate these laws.