US Regulator Expands Lawsuit Against States to Protect Prediction Markets

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 New York's recent lawsuit against Coinbase and Gemini, alleging that their prediction market contracts contravene state gambling laws. Last year, the state also targeted Kalshi, demanding that it cease operations of its sports wagering platform. The CFTC maintains 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 signed a legal brief arguing that this stance threatens the states' ability to protect their citizens. CFTC Chairman Mike Selig has made this initiative a priority, with similar lawsuits filed against Arizona, Connecticut, and Illinois. The CFTC argues that event contracts are derivatives instruments within federal jurisdiction, while New York officials claim they are enforcing state laws on gambling to protect consumers.