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 that it cease operations of its sports wagering platform. The CFTC argues that federal law grants it 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 this stance threatens the states' ability to protect their citizens. CFTC Chairman Mike Selig has made this initiative a priority, with similar lawsuits filed against Arizona, Connecticut, and Illinois. The CFTC claims that event contracts are derivatives instruments within federal jurisdiction. In response to the lawsuit, 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.