Federal regulator escalates fight with New York as prediction-market legal battle heats up
The U.S. Commodity Futures Trading Commission filed suit against the state of New York on Friday, ratcheting up a national clash over who gets to police prediction markets — the federal regulator or state authorities.
The lawsuit, filed in the U.S. District Court for the Southern District of New York, frames the CFTC’s position bluntly: federal law assigns it “exclusive jurisdiction” over commodity futures, options and swaps traded on federally regulated exchanges, and that sweep extends to CFTC-registered designated contract markets offering event-based contracts. In short, the agency argues, state laws that try to restrict those markets are preempted.
The move comes after a week in which New York sued Coinbase and Gemini, accusing their prediction market offerings of violating state gambling statutes. New York has also targeted Kalshi previously, demanding the company halt a sports-wagering platform. The CFTC has said state court challenges are part of an “onslaught” aimed at limiting Americans’ access to event contracts and chipping away at the agency’s sole regulatory authority for prediction markets.
“This is one of our most prominent initiatives,” CFTC Chair Mike Selig — who took the helm about four months ago — said in defense of the agency’s aggressive posture. The CFTC has already sued Arizona, Connecticut and Illinois as part of the same push to assert federal jurisdiction over event contracts treated as derivatives.
But the legal landscape is far from settled. On Friday, 37 state attorneys general, including New York Attorney General Letitia James, filed a brief in a separate Kalshi case in Massachusetts arguing that Kalshi’s sweeping preemption theory would “threaten the States’ longstanding ability to protect their citizens” from gambling harms. That intervention signals a coordinated counterweight from state prosecutors worried about ceding regulatory power.
New York’s leadership defended its enforcement approach in a joint statement from AG Letitia James and Governor Kathy Hochul: “Once again, this administration is prioritizing big corporations over consumers and New Yorkers’ best interests. New York’s gambling laws are designed to protect consumers, whether they are placing bets in a prediction market or a casino. When gambling platforms, including prediction markets, violate our laws, we will not hesitate to hold them accountable. We look forward to continuing to defend our laws in court.”
Why crypto and DeFi watchers should care: prediction markets have become an attractive product for crypto-native firms and exchanges, and how courts resolve the preemption question will shape whether these products can operate under a single federal framework or face a patchwork of state gambling rules. A CFTC win could centralize regulatory oversight and enable broader rollouts of event contracts; a win for the states would preserve more local control and enforcement options — and likely force product changes or market exits for some platforms.
Next steps: the CFTC’s suit in the SDNY will proceed alongside ongoing litigation in Massachusetts and state court actions against specific platforms. Expect appeals and extended fights that could take years to resolve and will be closely watched by exchanges, prediction-market startups, and policymakers.
UPDATE (April 25, 2026, 01:20 UTC): Adds statement from Attorney General Letitia James and Governor Kathy Hochul.
Read more AI-generated news on: undefined/news
