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 recently sued 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 argues 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 in a legal brief that Kalshi's preemption claims threaten states' ability to protect their citizens. CFTC Chairman Mike Selig has prioritized this initiative, also suing Arizona, Connecticut, and Illinois over event contracts deemed derivatives instruments under federal jurisdiction. In response to the lawsuit, New York Attorney General James and Governor Kathy Hochul stated that they are enforcing state gambling laws to protect consumers, emphasizing that they will hold accountable any gambling platforms, including prediction markets, that violate these laws.