CFTC Expands Legal Battle to New York Over Regulation of Prediction Markets

In its latest move to assert nationwide regulatory control over prediction market firms, the US Commodity Futures Trading Commission filed a lawsuit against New York on Friday. This action comes after New York recently took legal action against Coinbase and Gemini, alleging that their prediction market contracts breached state gambling laws, and previously targeted Kalshi, demanding the cessation of its sports wagering 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. This stance is countered by 37 state attorneys general, including New York's Letitia James, who argue that such a broad interpretation of preemption undermines states' ability to protect their citizens. The CFTC's initiative, led by Chairman Mike Selig, has also resulted in lawsuits against Arizona, Connecticut, and Illinois, asserting that event contracts fall under federal jurisdiction as derivatives instruments. In response to the lawsuit, New York Attorney General Letitia James and Governor Kathy Hochul stated that they are enforcing state gambling laws to protect consumers, emphasizing that they will hold accountable any gambling platforms, including prediction markets, that violate these laws.