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 Coinbase and Gemini, alleging that their prediction market contracts breached state gambling laws, and also previously targeted Kalshi, demanding it shut down its sports wagering platform. The CFTC, as the federal derivatives regulator, claims that states have no right 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 is seeking to protect. However, a group of 37 state attorneys general, including New York's Letitia James, has countered with a legal brief arguing that this preemptive approach threatens states' ability to safeguard their citizens. CFTC Chairman Mike Selig has made this initiative a priority since taking office, with similar lawsuits filed against Arizona, Connecticut, and Illinois. In response to the lawsuit, New York Attorney General Letitia James and Governor Kathy Hochul stated that they are upholding state laws on gambling, emphasizing that their laws are designed to protect consumers, whether they engage in prediction markets or casino betting, and that they will hold accountable any platforms that violate these laws.