US Regulator Clashes with New York Over Prediction Market Oversight

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 cryptocurrency exchanges Coinbase and Gemini, alleging their prediction market contracts breached state gaming laws. The state had also previously targeted Kalshi, demanding that it cease operations of its sports betting platform. The CFTC argues that, as the federal derivatives regulator, it has sole authority over these firms and that state law is effectively superseded by federal law, which grants the agency exclusive jurisdiction over commodity futures, options, and swaps traded on federally regulated exchanges. However, a group of 37 state attorneys general, including New York's Letitia James, has countered this stance by signing a legal brief that argues Kalshi's preemption claims threaten the states' ability to safeguard their citizens. CFTC Chairman Mike Selig has made this initiative a priority since taking office, with the agency also suing Arizona, Connecticut, and Illinois over similar issues. In response to the lawsuit, New York officials stated that they are upholding state laws on gambling, prioritizing consumer protection, and will continue to defend their laws in court.