US Regulator Takes New York to Court Over Prediction Market Dispute

In its latest move to assert nationwide authority, 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 took legal action against Coinbase and Gemini, alleging that their prediction market contracts breached state gambling laws, and previously targeted Kalshi over its sports wagering platform. The CFTC maintains that, as the federal derivatives regulator, it holds exclusive jurisdiction over commodity futures, options, and swaps traded on federally regulated exchanges, thereby preempting state law. However, a coalition of 37 state attorneys general, including New York's Letitia James, has countered this stance by arguing that such a broad interpretation of preemption undermines states' abilities to safeguard their citizens. CFTC Chairman Mike Selig has prioritized this issue, with the agency also taking similar action against Arizona, Connecticut, and Illinois. The dispute centers on the classification of event contracts as derivatives instruments under federal jurisdiction. Selig stated that CFTC-registered exchanges face numerous state lawsuits aimed at limiting access to event contracts and undermining the agency's regulatory authority. In response, James and New York Governor Kathy Hochul emphasized their commitment to enforcing state gambling laws, designed to protect consumers, and vowed to hold accountable any platforms that violate these laws.