The U.S. Commodity Futures Trading Commission sued New York on Friday in its latest action to protect what the agency has argued is its unquestioned nationwide regulatory authority over prediction market companies.
Earlier this week, New York sued Coinbase and Gemini, arguing that their prediction market contracts violated state gambling laws. And last year, the state had similarly attacked Kalshi, demanding that he cease his sports betting platform.
The CFTC, in its role as federal derivatives regulator, has taken the position that states have no business interfering with such companies. The agency’s complaint in the U.S. District Court for the Southern District of New York contends that federal law “designates the CFTC as the federal agency with ‘exclusive jurisdiction’ over the regulation of commodity futures, options, and swaps traded on federally regulated exchanges,” and that includes these designated contract markets registered by the CFTC. State law effectively takes precedence, depending on the synchronized positions of the regulator and the growing industry it seeks to protect.
But also on Friday, 37 state attorneys general, including New York Attorney General Letitia James, signed a legal brief in one of Kalshi’s legal fights in Massachusetts to argue that “Kalshi’s aggressive prevention theory threatens the long-standing ability of states to protect their citizens in this area.”
CFTC Chairman Mike Selig has made this one of his most notable initiatives since taking over the agency four months ago, and his agency has also sued Arizona, Connecticut and Illinois, alleging that event contracts are derivative instruments within federal jurisdiction.
“CFTC-registered exchanges have faced an avalanche of state lawsuits seeking to limit Americans’ access to event contracts and undermine the CFTC’s exclusive regulatory jurisdiction over prediction markets,” it said in a statement.
