US Regulator Clashes with New York Over Prediction Markets

In a recent move, the US Commodity Futures Trading Commission filed a lawsuit against New York, marking the latest development in its efforts to assert nationwide regulatory authority over prediction market firms. This action comes after New York took legal action against Coinbase and Gemini, alleging their prediction market contracts breached state gambling laws. The state had previously targeted Kalshi, demanding the cessation of its sports wagering platform. The CFTC, as the federal derivatives regulator, maintains that states should not 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 effectively preempts state law, according to the regulator and the growing industry it seeks to protect. However, a group of 37 state attorneys general, including New York's Letitia James, countered with a legal brief arguing that this preemption theory threatens states' ability to safeguard their citizens. CFTC Chairman Mike Selig has prioritized this initiative, and the agency has filed similar lawsuits against Arizona, Connecticut, and Illinois, claiming event contracts fall under federal jurisdiction. In response to the lawsuit, New York Attorney General James and Governor Kathy Hochul stated they are enforcing state laws on gambling, emphasizing the need to protect consumers and hold accountable gambling platforms that violate state laws.