US CFTC Takes New York to Court Over Regulatory Dispute on Prediction Markets

In its latest move to assert nationwide authority, the US Commodity Futures Trading Commission has filed a lawsuit against New York, seeking to prevent the state from interfering with the operations of prediction market firms. This development comes after New York took action against Coinbase and Gemini, alleging that their prediction market contracts were in violation of state gambling laws. The state had previously targeted Kalshi, demanding that it discontinue its sports wagering platform. The CFTC maintains that, as the federal derivatives regulator, it has exclusive 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 that the CFTC's stance threatens the states' ability to protect their citizens. CFTC Chairman Mike Selig has made this initiative a priority, with the agency having also sued Arizona, Connecticut, and Illinois over similar issues. The dispute centers on whether event contracts are derivatives instruments within federal jurisdiction. In response to the lawsuit, New York officials stated that they are enforcing state laws on gambling to protect consumers, and they will continue to defend their laws in court.