The Commodity Futures Trading Commission has sued New York over its effort to apply state gambling laws to prediction market platforms.
Summary
- The CFTC says New York’s gambling enforcement threatens federal oversight of prediction market contracts nationwide.
- New York has sued Coinbase and Gemini over prediction products it says breach gambling rules.
- Thirty-seven states backed Massachusetts, arguing federal law does not replace state sports betting oversight rules.
The lawsuit adds another legal fight to the growing debate over who should regulate event-based contracts in the United States.
The CFTC filed the complaint in the U.S. District Court for the Southern District of New York. It asked the court for a declaratory judgment and a permanent injunction to stop New York from enforcing gambling rules against federally registered exchanges.
Federal regulator claims sole authority
The CFTC argued that federal law gives it exclusive power over prediction markets listed by registered exchanges. The agency said New York’s actions could interfere with its authority over event contracts.
CFTC Chair Michael Selig said, “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 addition, New York recently filed lawsuits against Coinbase and Gemini. The state claimed their prediction market products violated local gambling laws. It had also targeted Kalshi over parts of its sports-related contracts.
The cases show a wider clash between federal market rules and state gambling oversight. Prediction platforms argue that their contracts fall under federal commodity laws, while states say sports and betting activity remain under their control.
States back tighter prediction market rules
A group of 37 states and Washington, D.C. filed an amicus brief supporting Massachusetts in its case against Kalshi. They urged the court to reject Kalshi’s claim that federal law lets it offer sports contracts nationwide without state approval.
The states said federal financial law was not meant to legalize sports betting. They also argued that state rules help manage licensing, age checks, fraud controls, and gambling addiction safeguards.
Crackdown grows across several states
Arizona, Connecticut, Illinois, Massachusetts, Nevada, and New York have all moved against prediction market firms. Their actions include lawsuits, cease-and-desist letters, and regulatory orders tied to sports and event contracts.
Earlier this month, a Nevada judge extended a ban that blocked Kalshi from offering some event-based contracts in the state. Regulators argued those products looked like unlicensed gambling, while platforms continue to defend them as federally regulated markets.
