U.S. CFTC adds New York to string of states its suing to stop prediction market pushback

The U.S. Commodity Futures Trading Commission (CFTC) has taken legal action against New York in an effort to uphold its authority over prediction market firms. This move comes after New York filed lawsuits against Coinbase and Gemini, alleging that their prediction market contracts violated state gambling laws. Last year, the state targeted Kalshi for its sports wagering platform.

The CFTC, as the federal derivatives regulator, asserts that states have no right to interfere with these firms. The agency argues that federal law designates it as the sole regulator of commodity futures, options, and swaps traded on federally regulated exchanges, including designated contract markets. This means that state law is preempted in this area.

However, 37 state attorneys general, including New York Attorney General Letitia James, have signed onto a legal brief opposing the CFTC’s position. They argue that Kalshi’s interpretation of preemption threatens the states’ ability to protect their citizens.

CFTC Chairman Mike Selig has been leading the charge in these legal battles, with the agency also suing Arizona, Connecticut, and Illinois over event contracts. Selig emphasizes that CFTC-registered exchanges are facing numerous state lawsuits that seek to restrict access to event contracts and undermine the agency’s regulatory jurisdiction.

In response, James and New York Governor Kathy Hochul maintain that they are enforcing state laws on gambling to protect consumers. They argue that when gambling platforms, including prediction markets, violate these laws, they will hold them accountable in court.

This ongoing dispute highlights the clash between federal and state regulatory authority in the prediction market industry. As the legal battles continue, it remains to be seen how these conflicting interests will be resolved.