CFTC Expands Lawsuit Campaign to New York Over Prediction Market Regulation

In its ongoing effort to assert nationwide regulatory control over prediction market firms, the US Commodity Futures Trading Commission has filed a lawsuit against New York. This move is the latest in a series of actions taken by the CFTC to protect its jurisdiction over these firms. The lawsuit comes after New York took legal action against cryptocurrency exchanges Coinbase and Gemini, alleging that their prediction market contracts breached state gambling laws. The state had previously targeted Kalshi, demanding that it shut down its sports wagering platform. The CFTC argues that, as the federal derivatives regulator, it has exclusive authority over the regulation of 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, have countered this claim, stating that the CFTC's position threatens the states' ability to safeguard their citizens. CFTC Chairman Mike Selig has made this initiative a priority, with the agency also suing Arizona, Connecticut, and Illinois over similar issues. The CFTC maintains that its registered exchanges are facing undue interference from state lawsuits, which undermine the agency's regulatory authority over prediction markets. 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 and that they will hold accountable any platforms that violate them.