The U.S. Commodity Futures Trading Commission sued New York on Friday in its latest action to shield what the agency has argued is its unassailable nationwide regulatory authority over prediction market firms.
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 targeted Kalshi, demanding it cease its sports wagering platform.
The CFTC, in its role as the federal derivatives regulator, has staked out a position that the states have no business interfering with those firms. The agency's suit 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 these CFTC-registered designated contract markets. State law is effectively preempted, according to the synchronized positions of the regulator and the growing industry it's seeking to protect.
But also on Friday, 37 state attorneys general — including New York Attorney General Letitia James — signed onto a legal brief in one of the Kalshi legal fights in Massachusetts to argue that "Kalshi’s aggressive theory of preemption threatens the States’ longstanding ability to protect their citizens in this area."
CFTC Chairman Mike Selig has made this one of his most prominent initiatives since taking over the agency four months ago, and his agency has similarly sued Arizona, Connecticut and Illinois, claiming event contracts are derivatives instruments within federal jurisdiction.
"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," he said in a statement.
