CFTC Takes New York to Court Over Regulatory Authority on Prediction Markets

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 gambling laws. The state had also previously targeted Kalshi, a sports wagering platform. The CFTC maintains that, as the federal derivatives regulator, it has sole jurisdiction over commodity futures, options, and swaps traded on federally regulated exchanges, thereby preempting state law. However, a group of 37 state attorneys general, including New York's Letitia James, has countered this stance in a legal brief, arguing that such a broad interpretation of preemption undermines the states' ability to protect their citizens. CFTC Chairman Mike Selig has made this initiative a priority, with similar lawsuits filed against Arizona, Connecticut, and Illinois. The regulator claims that state lawsuits are attempting to limit access to event contracts and undermine its authority over prediction markets. In response, New York officials have stated that they are enforcing state laws on gambling to protect consumers, whether in prediction markets or casinos, and will hold accountable any platforms that violate these laws.