The U.S. Commodity Futures Trading Commission (CFTC) sued New York on Friday, marking the latest attempt by the federal regulator to block state-level interference in the prediction market industry.
According to a report by CoinDesk, the lawsuit seeks to defend the agency's claim of exclusive nationwide authority over prediction market firms. The CFTC argues that state laws attempting to regulate these platforms are preempted by federal law.
The legal action follows recent moves by New York officials against major crypto-related platforms. Earlier this week, New York sued Coinbase and Gemini, alleging that their prediction market offerings violate state gambling laws.
This follows a similar pattern from the state last year, when New York targeted Kalshi to stop its sports wagering platform. The CFTC's lawsuit, filed in the U.S. District Court for the Southern District of New York, asserts that federal law designates the agency with 'exclusive jurisdiction' over the regulation of commodity futures, options, and swaps on regulated exchanges.
A growing legal battle
The CFTC is not acting alone in its opposition to state-led regulation. The agency has previously filed lawsuits against Arizona, Connecticut, and Illinois, arguing that event contracts are derivatives instruments that fall under federal oversight.
However, state officials are coordinating a counter-offensive. On Friday, 37 state attorneys general, including New York Attorney General Letitia James, signed a legal brief in a Massachusetts case involving Kalshi. The group argued that Kalshi's legal theory of preemption 'threatens the States’ longstanding ability to protect their citizens in this area.'
CFTC Chairman Mike Selig has prioritized these lawsuits since taking office four months ago. The agency maintains that state-level efforts to reclassify prediction markets as regulated gaming undermine federal oversight.
'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,' the CFTC stated, according to CoinDesk.
