US Regulator CFTC Takes New York to Court Over Prediction Market Dispute

In its latest move to assert nationwide regulatory control over prediction market companies, the US Commodity Futures Trading Commission filed a lawsuit against New York on Friday. This action comes after New York recently sued major cryptocurrency exchanges Coinbase and Gemini, alleging their prediction market contracts breached state gambling laws. The state had also previously targeted Kalshi, demanding the cessation of its sports betting 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, a group of 37 state attorneys general, including New York's Letitia James, have countered this stance, signing a legal brief that argues Kalshi's preemption claims threaten 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 deemed derivatives instruments under federal jurisdiction. Selig stated that CFTC-registered exchanges face numerous state lawsuits attempting to limit access to event contracts and undermine the CFTC's regulatory authority. In response, James and New York Governor Kathy Hochul asserted their commitment to enforcing state gambling laws, emphasizing the need to protect consumers and hold accountable gambling platforms that violate these laws.