CFTC Takes NY State to Court Over Prediction Markets

The Commodity Futures Trading Commission (CFTC) announced Friday (April 24) that it had filed suit against New York in response to what the regulator said was the state’s effort to apply its gambling laws to CFTC-regulated contract markets.

It’s the latest in a series of legal battles between state and federal authorities centered around regulatory control over the prediction markets.

“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,” Michael S. Selig, the commission’s chairman, said in a news release.

“New York is the latest state to ignore federal law and decades of precedent by seeking to enforce state gambling laws against CFTC-registered exchanges. As I’ve said before, the CFTC will not allow overzealous state governments to undermine the agency’s longstanding authority over these markets.” 

The release noted that the CFTC is seeking a declaratory judgment that federal law allows it exclusive authority to regulate event contracts and requests a permanent injunction blocking the state from enforcing “preempted state laws against its registrants.”

The CFTC has filed similar suits in Illinois, California and Arizona. This latest suit came the same day that New York Attorney General Letitia James joined 37 other attorneys general in an amicus brief supporting Massachusetts’ lawsuit against the prediction market platform Kalshi. 

That brief argues that Kalshi should be subject to state gambling laws and calls on the court to reject the company’s argument that its bets should be regulated solely by the CFTC.

“Prediction markets cannot ignore states’ gambling laws that are designed to protect consumers,” James said in a news release. “Kalshi’s event contracts for sports are just illegal gambling by another name, and they should play by the same rules as every other licensed gambling platform.”

New York last week sued Coinbase and Gemini Titan, alleging that the companies’ prediction market platforms are illegal, unlicensed gambling operations. Coinbase’s chief legal officer responded by saying that prediction markets are regulated by the federal government.

Meanwhile, Wisconsin sued five prediction market platforms — Kalshi, Robinhood, Coinbase, Polymarket, Crypto.com — and their affiliates last week, alleging they operate illegal sports betting operations in the state.

“Thinly disguising unlawful conduct doesn’t make it lawful,” Wisconsin Attorney General Josh Kaul said in a news release. “These companies’ alleged facilitation of sports betting in Wisconsin should be shut down.”