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 has filed a lawsuit against New York. The action comes after New York recently took Coinbase and Gemini to court, alleging that their prediction market contracts breached state gambling laws. Last year, the state also targeted Kalshi, demanding that it cease operations of its sports wagering platform. The CFTC argues that, as the federal derivatives regulator, it has sole jurisdiction over commodity futures, options, and swaps traded on federally regulated exchanges, effectively preempting state law. However, a group of 37 state attorneys general, including New York's Letitia James, has countered this claim, arguing that such a stance threatens the states' ability to protect their citizens. The CFTC has also sued Arizona, Connecticut, and Illinois, claiming that event contracts are derivatives instruments within federal jurisdiction. Chairman Mike Selig has made this a key initiative, stating that CFTC-registered exchanges face an onslaught of state lawsuits seeking to limit access to event contracts and undermine the CFTC's regulatory authority. In response, New York Attorney General James and Governor Kathy Hochul stated that they are enforcing state laws on gambling, prioritizing consumer protection over corporate interests.