CFTC Sues New York, Says States Can’t Regulate Prediction Markets

The US Commodity Futures Trading Commission has sued New York over jurisdiction of prediction markets, seeking to block the state’s effort to classify the products as gambling and punish exchanges offering them.

CoinDesk reported on April 24 that the CFTC filed the lawsuit that day in the US District Court for the Southern District of New York. The suit came after New York earlier this week sued crypto exchanges Coinbase and Gemini, alleging their prediction market contracts violated state gambling laws. New York also sought last year to force Kalshi to stop operating.

The CFTC argues that federal law gives it exclusive jurisdiction over the regulation of commodity futures, options and swaps traded on federally regulated exchanges. On that basis, states have no authority to interfere with the operations of companies registered with the agency.

States are pushing back. New York Attorney General Letitia James and attorneys general from 37 states filed a joint brief on April 24 in a Kalshi case pending in Massachusetts, arguing that Kalshi’s federal preemption theory threatens states’ long-standing authority to protect residents in this area.

In a statement, Acting Chairman Caroline D. Pham said exchanges registered with the CFTC are facing a barrage of meritless state lawsuits aimed at restricting Americans’ access to prediction markets. Those actions, she said, undermine the CFTC’s sole regulatory authority over prediction markets.