US Regulator Takes New York to Court Over Prediction Market Dispute

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 follows New York's recent lawsuit against Coinbase and Gemini, alleging their prediction market contracts breached state gambling laws, as well as a similar case against Kalshi last year. The CFTC argues that, as the federal derivatives regulator, it has exclusive jurisdiction over commodity futures, options, and swaps traded on federally regulated exchanges, thereby preempting state law. However, 37 state attorneys general, including New York's Letitia James, countered with a legal brief arguing that this stance threatens states' ability to protect citizens. CFTC Chairman Mike Selig has prioritized this initiative, also suing Arizona, Connecticut, and Illinois over event contracts deemed derivatives instruments under federal jurisdiction. In response, New York Attorney General James and Governor Kathy Hochul stated they are upholding state laws on gambling, prioritizing consumer protection over corporate interests.