US Regulator Takes New York to Court Over Prediction Markets 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 their prediction market contracts breached state gambling laws, as well as a similar case against Kalshi last year. The CFTC argues 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, 37 state attorneys general, including New York's Letitia James, have countered this stance in a Massachusetts legal case, arguing that such a broad interpretation of preemption undermines states' ability to protect their citizens. CFTC Chairman Mike Selig has made this initiative a priority, with similar lawsuits filed against Arizona, Connecticut, and Illinois. In response to the lawsuit, New York Attorney General James and Governor Kathy Hochul stated that they are upholding state laws on gambling, prioritizing consumer protection and vowing to hold accountable any gambling platforms, including prediction markets, that violate these laws.