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, seeking to block the state's efforts to curb prediction market operations. This action follows New York's recent lawsuit against Coinbase and Gemini, alleging their prediction market contracts breached state gaming laws. Last year, the state also targeted Kalshi, demanding it shut down its sports betting platform. The CFTC, as the federal derivatives regulator, claims it has exclusive jurisdiction over commodity futures, options, and swaps traded on federally regulated exchanges, effectively preempting state law. However, 37 state attorneys general, including New York's Letitia James, have countered that this stance threatens the states' ability to protect their citizens. CFTC Chairman Mike Selig has prioritized this initiative, with the agency also suing Arizona, Connecticut, and Illinois over similar issues. The dispute centers on the classification of event contracts as derivatives instruments within federal jurisdiction. While the CFTC argues that state lawsuits undermine its regulatory authority, New York officials claim they are enforcing state laws on gambling to protect consumers.