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

In its ongoing effort to assert regulatory authority, the US Commodity Futures Trading Commission has filed a lawsuit against New York, marking the latest development in a series of lawsuits against states seeking to limit prediction market operations. The move comes after New York took legal action against major cryptocurrency exchanges Coinbase and Gemini, alleging that their prediction market contracts breached state gambling laws. Similarly, the state had previously targeted Kalshi, demanding the cessation of its sports wagering platform. The CFTC, as the primary federal derivatives regulator, maintains 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 is countered by 37 state attorneys general, including New York's Letitia James, who argue that such a broad interpretation of preemption undermines states' ability to safeguard their citizens. CFTC Chairman Mike Selig has prioritized this initiative, with the agency also suing Arizona, Connecticut, and Illinois over event contracts deemed derivatives instruments within federal jurisdiction. Selig stated that CFTC-registered exchanges face numerous state lawsuits attempting to restrict access to event contracts and undermine the agency's regulatory authority. In response, New York Attorney General James and Governor Kathy Hochul emphasized their commitment to enforcing state gambling laws, prioritizing consumer protection and holding accountable platforms that violate these laws.