US Regulator Sues New York to Block State's Efforts to Restrict Prediction Markets

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 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 maintains that, as the federal derivatives regulator, it has sole authority over these firms, and that state interference is unwarranted. According to the CFTC's lawsuit in the US District Court for the Southern District of New York, federal law grants the agency 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, has countered this stance in a legal brief supporting a case against Kalshi in Massachusetts, arguing that the company's preemption claims threaten the states' ability to protect their citizens. CFTC Chairman Mike Selig has made this initiative a priority since taking office, with the agency having also sued Arizona, Connecticut, and Illinois over similar issues. In response to the lawsuit, New York Attorney General James and Governor Kathy Hochul stated that they are upholding state laws on gambling, emphasizing that these laws are designed to protect consumers, whether they are participating in prediction markets or casino betting, and that they will hold accountable any platforms that violate these laws.