US Regulator Takes New York to Court Over Prediction Market Dispute

In its ongoing effort to assert nationwide regulatory control, the US Commodity Futures Trading Commission has filed a lawsuit against New York, marking the latest development in a series of legal actions aimed at shielding prediction market firms from state interference. This move 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 argues that, as the federal derivatives regulator, it holds exclusive jurisdiction over commodity futures, options, and swaps traded on federally regulated exchanges, thereby preempting state law. However, a coalition of 37 state attorneys general, including New York's Letitia James, has countered this stance by signing a legal brief that warns Kalshi's preemption theory poses a threat to states' ability to protect their citizens. CFTC Chairman Mike Selig has made this initiative a top priority since assuming his role, 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 released a statement emphasizing their commitment to enforcing state gambling laws and prioritizing consumer protection.