CFTC sues New York over regulation of prediction markets
The Commodity Futures Trading Commission (CFTC) has filed a lawsuit against the state of New York to prevent it from applying state gambling laws to federally-regulated prediction markets.
The complaint, filed in the US District Court for the Southern District of New York, argues that federal law gives the CFTC exclusive authority over event-based contracts offered on registered exchanges, and is asking for a permanent injunction to block New York from taking action.
The legal action follows recent lawsuits by New York against cryptocurrency sites Coinbase and Gemini, in which the state alleged their prediction market products broke state laws. The state has also taken action against Kalshi, ordering the prediction market company to halt certain sports-related contracts.
At the same time, a coalition of 37 states and Washington, DC, has filed an amicus brief supporting Massachusetts in a separate case against Kalshi. The brief urges the state’s highest court to reject claims that federal law allows nationwide sports betting through prediction markets without complying with state regulations.
The states say that federal financial laws were not supposed to apply to sports betting and don’t override state authority on gambling oversight. They also state that removing state-level regulation could weaken protections related to licensing, age restrictions, fraud prevention, and gambling addiction. Several states, including Arizona, Connecticut, and Illinois, have also increased enforcement actions against prediction market operators.
