- The regulator maintains that prediction market contracts are derivatives.
- It says federal law gives it exclusive authority over such products on registered exchanges.
A growing dispute over who controls prediction markets in the United States intensified on Friday after the Commodity Futures Trading Commission filed a lawsuit against New York. The case marks the latest step in the regulator’s effort to stop states from taking action against platforms offering event-based contracts.
The lawsuit follows recent moves by New York authorities against platforms linked to Coinbase and Gemini. State officials argued that the products offered by these firms violated local gambling laws. The CFTC disagreed and quickly responded with legal action.
The federal regulator stated that prediction market contracts fall under derivatives trading. It said federal law gives the agency exclusive authority to regulate such products when they are listed on registered exchanges. The CFTC argued that state-level enforcement interferes with this framework and creates regulatory confusion.
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States And CFTC Clash Over Control
CFTC Chairman Mike Selig criticized the wave of state actions. He said registered platforms face “an onslaught of state lawsuits” that limit access to event contracts and challenge the agency’s jurisdiction.
New York officials defended their position. Attorney General Letitia James and Governor Kathy Hochul said the state has a duty to enforce its gambling laws and protect residents. They stressed that rules apply equally to casinos and prediction market platforms.
The case adds to a broader legal campaign by the CFTC. The agency has already sued Arizona, Connecticut, and Illinois over similar issues. At the same time, a group of 37 state attorneys general has backed efforts to resist federal preemption in related cases. The outcome of these disputes could shape how prediction markets operate across the country, especially as more firms enter the sector.
