US Regulator Clashes with New York Over Prediction Market Oversight

In a recent move, the US Commodity Futures Trading Commission has filed a lawsuit against New York, marking the latest development in its efforts to assert nationwide regulatory control over prediction market firms. This action follows New York's own lawsuit against Coinbase and Gemini, alleging violations of state gambling laws through their prediction market contracts. Last year, the state also targeted Kalshi, demanding the cessation of its sports wagering platform. The CFTC maintains that federal law grants it exclusive jurisdiction over commodity futures, options, and swaps traded on federally regulated exchanges, effectively preempting state law. However, a coalition of 37 state attorneys general, including New York's Letitia James, has countered with a legal brief arguing that this stance threatens states' ability to protect 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 an onslaught of state lawsuits seeking to limit access to event contracts and undermine the CFTC's regulatory jurisdiction. In response, James and New York Governor Kathy Hochul asserted their commitment to enforcing state gambling laws, designed to protect consumers and hold accountable platforms violating these laws.