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 protect its regulatory oversight of prediction market firms. This action follows New York's recent lawsuit against Coinbase and Gemini, alleging that their prediction market contracts breached state gambling laws, as well as a similar action against Kalshi last year. 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, 37 state attorneys general, including New York's Letitia James, have countered with a legal brief arguing that such a stance undermines states' ability to safeguard their citizens. The CFTC's chairman, Mike Selig, has prioritized this initiative, also suing Arizona, Connecticut, and Illinois over event contracts deemed derivatives instruments within federal jurisdiction. In response, New York Attorney General James and Governor Kathy Hochul stated that they are enforcing state laws to protect consumers from gambling violations, emphasizing that they will hold accountable any platform, including prediction markets, that breaches these laws.