The U.S. Commodity Futures Trading Commission sued New York on Friday in its most high-profile jurisdictional clash yet, asserting that federal law grants the agency exclusive authority over prediction market platforms and that state-level interference is legally preempted. The supporting evidence appears in the filing.
The lawsuit, filed in the U.S. District Court for the Southern District of New York, escalates a nationwide regulatory battle that has now drawn in four states and dozens of attorneys general.
The action follows New York’s decision earlier this week to sue Coinbase and Gemini, alleging that prediction market contracts offered by those platforms violate state gambling laws. According to the CFTC’s official press release, the agency argues that federal law designates it as the regulator with “exclusive jurisdiction” over commodity futures, options, and swaps traded on federally regulated exchanges, which encompasses these CFTC-registered designated contract markets.
A Four-State Legal Campaign Under CFTC Chair Mike Selig
CFTC Chairman Mike Selig, who took over the agency roughly four months ago, has made defending prediction market jurisdiction one of his central priorities.
Before targeting New York, his agency filed similar suits against Arizona, Connecticut, and Illinois, each time arguing that event contracts are derivatives instruments that fall squarely within federal regulatory authority.
“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,” Selig said in a statement accompanying Friday’s filing.
His language signals the agency does not intend to stop suing states that challenge its turf, and the growing docket suggests this legal campaign is far from over.
The CFTC’s core legal theory is straightforward: once a platform registers as a designated contract market under federal law, state gambling statutes simply cannot reach it.
That preemption argument has become the cornerstone of the agency’s litigation strategy across all four states, and it mirrors the position that prediction market operators themselves have advanced in their own legal battles.
New York is not the first state to specifically go after Kalshi, the prediction markets pioneer. Last year, New York targeted Kalshi directly, ordering the platform to shut down its sports wagering offering.
The CFTC’s intervention on behalf of that sector has since widened to cover Coinbase’s and Gemini’s event contract products, illustrating how quickly the prediction markets industry has expanded beyond its initial players.
States Push Back With a 37-Attorney General Coalition
The states are not conceding ground quietly. On the same Friday the CFTC filed its New York lawsuit, 37 state attorneys general signed onto a legal brief in a separate Kalshi case being fought in Massachusetts. That amicus brief, which includes New York Attorney General Letitia James among its signatories, argues that “Kalshi’s aggressive theory of preemption threatens the States’ longstanding ability to protect their citizens in this area.”
The breadth of that coalition is significant. Thirty-seven attorneys general representing a wide ideological range of states lining up in a single brief signals that the opposition to the CFTC’s preemption theory is not confined to a few progressive jurisdictions.
It reflects a genuine federalism concern about whether a federal derivatives regulator can effectively nullify decades of state-level gambling oversight simply by registering a platform.
New York Governor Kathy Hochul and Attorney General James issued their own joint statement Friday afternoon, framing the state’s actions as a straightforward enforcement of existing gambling law rather than a jurisdictional power grab.
Their position is that prediction markets involving sports outcomes and electoral events are functionally indistinguishable from gambling products that states have always had the authority to regulate.
The clash puts two major crypto-adjacent platforms, Coinbase and Gemini, directly in the crossfire of a constitutional dispute over regulatory supremacy.
Both companies have built out prediction market features as part of broader efforts to diversify beyond spot trading, and any adverse state court ruling could force them to restrict those products in New York and potentially in any other state that follows the same legal theory.
For the wider crypto industry, the outcome of these cases carries consequences that extend beyond prediction markets specifically.
The CFTC’s argument that federal registration confers nationwide operating rights, shielded from state interference, is a principle that could eventually apply to other federally regulated crypto products.
A judicial win for the agency would strengthen the hand of any exchange or platform seeking to operate uniformly across all fifty states without navigating a patchwork of conflicting local rules.
Courts in multiple jurisdictions will now be weighing the same core constitutional question simultaneously, which raises the prospect of conflicting rulings before any appellate court can bring clarity.
The Massachusetts Kalshi case, the new New York lawsuit, and the earlier filings against Arizona, Connecticut, and Illinois together create a complex legal map that the industry, regulators, and state governments will be watching closely in the months ahead.
Not Financial Advice: This article is for informational purposes only. Crypto investments are highly volatile. Always do your own research.
