The U.S. Commodity Futures Trading Commission (CFTC) has initiated legal action against New York, asserting its authority over prediction markets amid a growing conflict with state regulators. The lawsuit, filed in the U.S. District Court for the Southern District of New York, aims to affirm the CFTC’s claim to exclusive jurisdiction over commodity futures and related contracts.
This move follows New York’s recent lawsuits against cryptocurrency exchanges Coinbase and Gemini, which the state alleges are violating local gambling laws through their prediction market contracts. Last year, New York also targeted Kalshi, demanding that it halt operations related to sports wagering.
The CFTC contends that federal law grants it sole regulatory power over designated contract markets, effectively preempting state laws. In the agency’s view, the states should not interfere with the operations of prediction market firms that are registered with the CFTC.
In a counteraction, 37 state attorneys general, including New York Attorney General Letitia James, have rallied together to support a legal brief in a Massachusetts case involving Kalshi. They argue that Kalshi’s interpretation of federal preemption undermines the states’ ability to protect their citizens in matters related to gambling.
CFTC Chairman Mike Selig has emphasized the importance of this initiative since taking office four months ago. He has also filed lawsuits against states like Arizona, Connecticut, and Illinois, claiming that event contracts fall under federal jurisdiction as derivatives instruments.
In a statement, Selig remarked, “CFTC-registered exchanges have faced an onslaught of state lawsuits seeking to limit Americans’ access to event contracts and undermine the CFTC’s sole regulatory jurisdiction over prediction markets.”
In response, Attorney General James and New York Governor Kathy Hochul defended their state’s gambling laws. They stated, “This administration is prioritizing big corporations over consumers and New Yorkers’ best interests. New York’s gambling laws are designed to protect consumers, whether they are placing bets in a prediction market or a casino. When gambling platforms, including prediction markets, violate our laws, we will not hesitate to hold them accountable. We look forward to continuing to defend our laws in court.”
The CFTC has sued New York to assert its control over prediction markets, countering state efforts to regulate these platforms. This legal battle highlights the tension between federal and state authorities over gambling laws and market regulations.