The U.S. Commodity Futures Trading Commission sued New York on Friday in its latest action to protect what the agency considers its unassailable domestic regulatory authority over prediction market companies.
Earlier this week, New York sued Coinbase and Gemini, arguing that their prediction market contracts violated the state’s gambling laws. And last year, the state also targeted Kalshi, demanding that he shut down his sports betting platform.
The CFTC, in its role as the federal derivatives regulator, has taken the position that states have no business interfering with these companies. The agency’s lawsuit in the U.S. District Court for the Southern District of New York argues 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 those designated contract markets registered with the CFTC. State law is effectively preempted, based 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 preemption theory threatens states’ long-standing ability to protect their citizens in this area.”
CFTC Chairman Mike Selig has made it one of his most significant initiatives since taking over the agency four months ago, and his agency has also sued Arizona, Connecticut and Illinois, claiming that event contracts are derivative instruments under federal jurisdiction.
“Exchanges registered with the CFTC have faced a wave of lawsuits aimed at limiting Americans’ access to event-driven contracts and undermining the CFTC’s unique regulatory jurisdiction over prediction markets,” he said in a statement.
