CFTC Sues New York Over Prediction Market Betting Rules

The Commodity Futures Trading Commission filed a lawsuit in the U.S. District Court for the Southern District of New York, asking for a declaratory judgment and a permanent injunction to prevent New York from enforcing state gambling statutes against exchanges registered with the CFTC. The agency says federal law gives it exclusive authority over certain event-based contracts offered on prediction markets.

CFTC Chair Michael Selig, in a statement, wrote: “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 complaint asks the court to confirm federal preemption and to bar New York enforcement actions the agency calls improper.

The filing follows recent state actions. Earlier this week New York sued Coinbase and Gemini, alleging parts of their products violate state gambling laws. Regulators in New York previously ordered Kalshi to stop offering some sports-related contracts in the state. Officials in Arizona, Connecticut and Illinois have issued cease-and-desist letters or opened enforcement actions against prediction platforms, and a Nevada judge recently extended a ban keeping Kalshi from offering event-based contracts there.

A coalition of 37 states and the District of Columbia filed an amicus brief in Massachusetts’ litigation over Kalshi. The brief argues that a 2010 federal financial law does not legalize sports betting nationwide and does not clearly preempt traditional state authority over gambling. Kalshi maintains some of its markets are “swaps” regulated by the CFTC under that law.

State officials have emphasized licensing, age limits, fraud prevention and support for problem gambling as consumer protections provided by state gambling rules. The amicus brief warns that exempting prediction markets from state oversight would weaken those protections.

Court rulings have varied. A federal appeals court earlier blocked New Jersey from enforcing its laws against Kalshi, while other state courts and regulators have restricted platform offerings. The CFTC’s case in the Southern District of New York may proceed alongside multiple state actions and could move to higher appellate panels.