US Regulator Takes New York to Court Over Prediction Market Dispute

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 took legal action against Coinbase and Gemini, alleging that their prediction market contracts breached state gambling laws, and previously targeted Kalshi, demanding the cessation of its sports wagering platform. The CFTC, as the federal derivatives regulator, claims that states have no authority to interfere with these firms, citing federal law that grants it 'exclusive jurisdiction' over commodity futures, options, and swaps traded on federally regulated exchanges. This stance is countered by 37 state attorneys general, including New York's Letitia James, who argue that this preemption theory threatens states' ability to protect their citizens. CFTC Chairman Mike Selig has prioritized this initiative, with the agency also suing Arizona, Connecticut, and Illinois over event contracts being classified as derivatives instruments under federal jurisdiction. In response, New York Attorney General James and Governor Kathy Hochul stated that they are enforcing state laws on gambling to protect consumers, emphasizing that they will hold accountable any gambling platforms, including prediction markets, that violate these laws.