US Regulator Sues New York to Halt State's Crackdown on Prediction Markets

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 major cryptocurrency exchanges Coinbase and Gemini, alleging that their prediction market contracts breached state gambling laws. The state had also previously targeted Kalshi, demanding that it shut down its sports betting 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. According to the CFTC, this federal law preempts state law. However, a group of 37 state attorneys general, including New York's Letitia James, has countered this claim in a legal brief, arguing that allowing federal preemption would undermine states' ability to protect their citizens. CFTC Chairman Mike Selig has made this a key initiative since taking office, with the agency also suing Arizona, Connecticut, and Illinois over similar issues. Selig stated that CFTC-registered exchanges have faced 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 that they are enforcing state laws to protect consumers from gambling violations, and will continue to defend these laws in court.