US Regulator Takes New York to Court Over Prediction Market Dispute

In its latest move to assert nationwide regulatory control over prediction market companies, the US Commodity Futures Trading Commission has filed a lawsuit against New York. This action comes after New York recently took legal action against cryptocurrency exchanges Coinbase and Gemini, alleging their prediction market contracts breached state gambling laws. The state had also previously targeted Kalshi, demanding the cessation of its sports betting platform. The CFTC argues that, as the federal derivatives regulator, it has sole authority over these firms, and states should not interfere. The agency claims that federal law grants it exclusive jurisdiction over 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 in a legal brief, arguing that this stance threatens the states' ability to protect their citizens. CFTC Chairman Mike Selig has prioritized this initiative, and the agency has also taken similar action against Arizona, Connecticut, and Illinois. The CFTC maintains that its registered exchanges are facing undue state lawsuits attempting to limit access to event contracts and undermine the agency's regulatory authority. In response, New York officials stated they are enforcing state laws to protect consumers from gambling violations, and they will continue to defend these laws in court.