US Regulator Takes New York to Court Over Prediction Market Dispute

In its latest move to assert nationwide regulatory control, the US Commodity Futures Trading Commission has filed a lawsuit against New York. The lawsuit is part of a broader effort by the CFTC to shield prediction market firms from state-level regulation. Earlier in the week, New York had taken action against 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 wagering platform. The CFTC maintains that federal law grants it 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 that the CFTC's stance poses a threat to states' ability to protect their citizens. CFTC Chairman Mike Selig has made this issue a top priority, with the agency having also sued Arizona, Connecticut, and Illinois over similar matters. The CFTC argues that event contracts are derivatives instruments that fall under federal jurisdiction. In response to the lawsuit, New York Attorney General James and Governor Kathy Hochul stated that they are committed to enforcing state laws on gambling, emphasizing that these laws are designed to protect consumers and that they will hold accountable any platforms that violate them.