- The CFTC has now sued four states—Arizona, Connecticut, Illinois, and New York—to block enforcement actions against prediction market operators.
- The federal agency argues that state gambling laws are preempted by federal commodity derivatives authority under the supremacy clause.
- 37 state attorneys general signed a brief opposing CFTC preemption on the same day New York was hit with the federal lawsuit.
The U.S. Commodity Futures Trading Commission filed a lawsuit against New York on April 24, 2026, accusing the state of invading federal authority to regulate prediction markets amid an escalating legal battle over jurisdiction.
According to Reuters, the lawsuit was filed in Manhattan federal court in response to New York’s own legal action against cryptocurrency exchanges Coinbase and Gemini Titan, filed just days earlier on April 21, which alleged the companies should have obtained New York State Gaming Commission licenses to operate prediction markets in the state.
The CFTC action marks the latest development in what has become a coordinated federal campaign to protect prediction market operators from state-level legal challenges across multiple jurisdictions. CoinDesk reported that the regulator filed similar lawsuits against Arizona, Connecticut, and Illinois on April 2, with New York now added to the list as CFTC Chairman Mike Selig has made this initiative one of his most prominent priorities since taking over the agency four months ago.
The agency argues that federal law grants it exclusive jurisdiction over prediction markets as a derivatives regulator, and state gambling laws are effectively preempted by this federal authority.
The Core of the Jurisdictional Conflict
The CFTC’s complaint argues that New York’s litigation “intrudes on the exclusive federal scheme Congress designed” to oversee commodity derivatives markets, including prediction markets where users wager on outcomes of events such as sports and elections through “event contracts.” The CFTC stated that federal law designates the agency as having “exclusive jurisdiction” over regulation of commodity futures, options, and swaps traded on federally regulated exchanges.
New York Attorney General Letitia James and Governor Kathy Hochul responded with a joint statement defending state authority: “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.”
New York’s lawsuit against Coinbase and Gemini argued that prediction market contracts constitute “quintessentially gambling” because event outcomes are outside bettors’ control and amount to games of chance. Reuters noted that the state also objected to platforms allowing 18-to-20-year-olds despite New York law setting a minimum age of 21 for mobile sports betting. The political dimension of the conflict was evident in the state’s accusation that President Trump’s administration was “prioritizing big corporations” over consumers and New Yorkers, framing the dispute as a clash between federal deregulation priorities and state consumer protection efforts.
So, about those state attorneys general who spent years arguing that federal regulators were overstepping their authority—turns out they have a sudden change of heart when the federal government is actually using that authority to protect the very companies they wanted more regulations on. CoinDesk reported that 37 state attorneys general signed onto a legal brief opposing CFTC preemption on the same day New York faced the federal lawsuit, with New York AG Letitia James among the signatories despite her state’s own lawsuit being targeted.
Industry Implications and the Road Ahead for Prediction Markets
Prediction markets surged in popularity after their real-time probabilities proved more accurate than traditional polling in predicting Donald Trump’s 2024 presidential election victory, raising their profile as legitimate forecasting tools while simultaneously drawing increased regulatory scrutiny. Reuters reported that Kalshi, a major prediction market operator, had filed its own preemptive lawsuit against New York’s gaming commission in October to block any potential ban on event contracts, with that case still pending.
The outcome of these concurrent legal battles will determine whether prediction markets fall under exclusive federal commodity derivatives oversight or remain subject to state gambling regulations, establishing a precedent that could reshape the industry’s operational landscape nationwide.
The CFTC’s Chairman stated that “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.” CoinDesk noted that this language frames the regulatory battle as a fight for consumer access to financial instruments rather than a dispute between competing regulatory agencies. For prediction market operators like Coinbase, Gemini, and Kalshi, the stakes extend beyond legal compliance—they face potentially irreconcilable requirements from federal and state authorities that could force them to cease operations in certain states or restructure their platforms entirely.
The CFTC filed its complaint seeking an injunction blocking New York’s enforcement actions, arguing they violate the supremacy clause and are preempted by federal law. For now, prediction market users can continue placing bets on election outcomes and sporting events while the legal system works through the jurisdictional maze—a situation that benefits neither the operators seeking regulatory clarity nor the consumers the state claims to protect.