The Commodity Futures Trading Commission has escalated a growing regulatory clash with New York, suing the state in federal court to block efforts to treat prediction markets as gambling. The CFTC filed the complaint in the U.S. District Court for the Southern District of New York, asking for a declaratory judgment and a permanent injunction that would stop New York from enforcing its gambling laws against exchanges registered with the CFTC.
The agency says federal law gives it exclusive authority over event-based contracts listed on federally registered exchanges, and that New York’s actions risk undermining that federal jurisdiction. “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,” CFTC Chair Michael Selig said.
The suit comes amid multiple state-level enforcement actions targeting prediction market products offered by crypto and financial platforms. New York has recently sued Coinbase and Gemini, alleging some of their prediction-market offerings violate state gambling statutes, and has also targeted Kalshi over portions of its sports-related contracts. Regulators in Arizona, Connecticut, Illinois, Massachusetts, Nevada and New York have used lawsuits, cease-and-desist letters, and regulatory orders to push back on these products.
The dispute highlights a broader legal split: platforms argue their event contracts fall under federal commodity and derivatives laws and so are regulated by the CFTC, while states maintain that sports betting and other gambling-like activity remain within state authority. That tension was on display when 37 states and Washington, D.C. filed an amicus brief backing Massachusetts in its case against Kalshi. The states urged the court to reject Kalshi’s argument that federal law preempts state regulation of sports contracts, saying federal financial statutes were not intended to legalize sports betting and that state rules are necessary for licensing, age verification, fraud prevention and addiction safeguards.
Legal outcomes have already had immediate effects. A Nevada judge recently extended a ban preventing Kalshi from offering certain event-based contracts in that state after regulators said the products resembled unlicensed gambling. Platforms maintain their products are lawful, federally regulated markets.
The CFTC’s lawsuit against New York sharpens a high-stakes fight over regulatory turf that will be closely watched by crypto firms, prediction-market operators and investors. A ruling in this case could define whether event contracts are principally governed by federal commodity law or remain subject to a patchwork of state gambling regulations.
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