US CFTC Takes New York to Court Over Prediction Market Regulation

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 comes after New York recently sued cryptocurrency exchanges Coinbase and Gemini, alleging their prediction market contracts breached state gaming laws. The state had previously targeted Kalshi, demanding it shut down its sports betting platform. 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, have countered in a legal brief 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 event contracts. Selig stated that CFTC-registered exchanges face numerous state lawsuits attempting to limit access to event contracts and undermine the CFTC's regulatory authority. In response, New York Attorney General James and Governor Kathy Hochul asserted that they are enforcing state gaming laws to protect consumers, and will hold accountable any gambling platforms, including prediction markets, that violate these laws.