US CFTC Takes New York to Court Over Regulatory Authority on Prediction Markets

In its latest move to assert nationwide regulatory control, the US Commodity Futures Trading Commission has filed a lawsuit against New York, marking the latest development in an ongoing dispute over the regulation of prediction markets. The lawsuit comes on the heels of New York's own legal action against cryptocurrency exchanges Coinbase and Gemini, alleging that their prediction market contracts contravened state gambling laws. Similarly, the state had previously targeted Kalshi, demanding that it discontinue its sports wagering platform. The CFTC, which oversees federal derivatives regulation, has maintained 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. This stance has been echoed by the growing industry the regulator seeks to protect. However, a coalition of 37 state attorneys general, including New York's Letitia James, has countered this position in a legal brief, arguing that the theory of preemption posed by Kalshi threatens the states' ability to safeguard their citizens. CFTC Chairman Mike Selig has made this initiative a priority since assuming leadership of the agency, with similar lawsuits filed against Arizona, Connecticut, and Illinois. According to Selig, the goal is to protect Americans' access to event contracts and uphold the CFTC's sole regulatory jurisdiction over prediction markets. In response to the lawsuit, New York Attorney General Letitia James and Governor Kathy Hochul released a statement emphasizing their commitment to enforcing state laws on gambling, prioritizing consumer protection over corporate interests.