US Regulator Takes New York to Court Over Prediction Market Dispute

In its latest move to assert nationwide regulatory control, the US Commodity Futures Trading Commission has filed a lawsuit against New York, seeking to block the state's efforts to curb prediction market operations. This development comes after New York recently sued major cryptocurrency exchanges Coinbase and Gemini, alleging that their prediction market contracts breached state gambling laws. The state had also previously targeted Kalshi, demanding that it shut down its sports wagering platform. The CFTC, responsible for regulating federal derivatives, maintains that states lack the authority to interfere with these firms, citing federal law that grants it exclusive jurisdiction over commodity futures, options, and swaps traded on federally regulated exchanges. As a result, state laws are effectively superseded. However, a coalition of 37 state attorneys general, including New York's Letitia James, has countered this stance, signing a legal brief that argues Kalshi's claims of preemption pose a threat to states' ability to safeguard their citizens. CFTC Chairman Mike Selig has made this initiative a top priority, with the agency having also sued Arizona, Connecticut, and Illinois, claiming that event contracts fall under federal jurisdiction as derivatives instruments. Selig stated that CFTC-registered exchanges face numerous state lawsuits aimed at limiting access to event contracts and undermining the CFTC's regulatory authority over prediction markets. In response, James and New York Governor Kathy Hochul released a statement emphasizing their commitment to enforcing state gambling laws, prioritizing consumer protection, and holding accountable gambling platforms that violate these laws.