US Regulator Takes New York to Court Over Prediction Market Dispute

The US Commodity Futures Trading Commission has filed a lawsuit against New York, marking its latest effort to assert its nationwide regulatory authority over prediction market firms. This move comes after New York sued Coinbase and Gemini earlier in the week, alleging that their prediction market contracts breached state gambling laws. The state had previously targeted Kalshi, demanding that it discontinue its sports wagering platform. The CFTC maintains that states have no right to interfere with these firms, citing federal law that grants it 'exclusive jurisdiction' over commodity futures, options, and swaps traded on federally regulated exchanges. As a result, state law is effectively superseded. However, a group of 37 state attorneys general, including New York's Letitia James, have signed a legal brief arguing that Kalshi's preemption claims threaten the states' ability to protect their citizens. CFTC Chairman Mike Selig has made this a top priority since taking office, with the agency also suing Arizona, Connecticut, and Illinois over event contracts. The CFTC claims that these contracts are derivatives instruments within federal jurisdiction. In response to the lawsuit, New York Attorney General Letitia James and Governor Kathy Hochul stated that they are enforcing state laws on gambling, prioritizing consumer protection over corporate interests.