US Regulator CFTC 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 has filed a lawsuit against New York. This action follows the state's earlier lawsuit against Coinbase and Gemini, alleging that their prediction market contracts breached state gambling laws, as well as its previous action against Kalshi, demanding that the company cease its sports wagering operations. The CFTC maintains that, as the federal derivatives regulator, it has exclusive jurisdiction over commodity futures, options, and swaps traded on federally regulated exchanges, and thus state law is preempted. However, 37 state attorneys general, including New York's Letitia James, have countered in a legal brief that Kalshi's preemption claims threaten the states' ability to protect their citizens. CFTC Chairman Mike Selig has made this initiative a priority since taking office, 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, James and New York Governor Kathy Hochul asserted that they are enforcing state laws to protect consumers from gambling violations, and will hold accountable any platforms, including prediction markets, that breach these laws.