The Commodity Futures Trading Commission sued New York for its attempt to apply the state’s gambling laws to futures markets.
Summary
- The CFTC says New York’s gambling enforcement threatens the state’s oversight of futures market contracts nationwide.
- New York is suing Coinbase and Gemini over prediction products it says violates gambling laws.
- Thirty-seven states supported Massachusetts, arguing that the federal law does not supersede laws governing sports betting.
The case adds another legal battle to the growing debate over who should regulate event-based contracts in the United States.
The CFTC filed a complaint in the US District Court for the Southern District of New York. It asked the court to issue a declaratory judgment and injunction to stop New York from enforcing gambling laws against state-registered exchanges.
The Federal regulator seeks only one authority
The CFTC argued that federal law gives it exclusive jurisdiction over speculative markets listed on registered exchanges. The agency said New York’s action could interfere with its authority over event contracts.
CFTC Chairman Michael Selig said, “The CFTC’s registered brokers have faced an onslaught of federal lawsuits that seek to limit Americans’ access to event contracts and undermine the CFTC’s sole regulatory authority in the futures markets.”
In addition, New York recently filed lawsuits against Coinbase and Gemini. The state said their prediction market products violated local gambling laws. It also directed Kalshi to other parts of its sports-related contracts.
The cases show a wide conflict between federal market regulations and state gambling oversight. Betting platforms argue that their contracts fall under federal property laws, while states say sports and betting operations remain under their jurisdiction.
Countries are reinstating strict rules for the prediction market
A group of 37 states and Washington, DC filed an amicus brief supporting Massachusetts in its lawsuit against Kalshi. They urged the court to dismiss Kalshi’s claim that federal law allows the awarding of sports contracts across the country without federal approval.
The states argued that the federal finance law was not intended to legalize sports betting. They also argued that state laws help with licensing, age testing, fraud control, and gambling addiction protections.
Crackdown is expanding across several states
Arizona, Connecticut, Illinois, Massachusetts, Nevada, and New York have all aligned with prediction markets firms. Their actions include lawsuits, cease and desist orders, and regulatory orders related to sports and event contracts.
Earlier this month, a Nevada judge extended a ban that prevented Kalshi from awarding certain event-based contracts in the state. Regulators argued that those products looked like unauthorized gambling, while the platforms continued to defend them as government-regulated markets.
