The CFTC filed a lawsuit against New York on April 24 in the Southern District of New York, seeking a temporary injunction to stop the state from enforcing its gambling laws against registered predicted market exchanges.
Summary
- The CFTC sued New York after the state filed suits against Coinbase and Gemini earlier that week, saying their prediction market products violated the state’s gambling laws.
- The CFTC is seeking a declaratory judgment for the state’s exemption and a permanent injunction barring New York from enforcing gambling laws against its registered exchanges.
- New York joins Arizona, Connecticut, Illinois, and other states already facing CFTC lawsuits in the fast-growing federal-state battle over prediction markets.
The New York CFTC lawsuit was filed on April 24 in the US District Court for the Southern District of New York. The CFTC announced it is seeking a declaratory judgment that federal law gives it exclusive jurisdiction to regulate event contracts and a permanent injunction barring New York from enforcing state gambling laws against its subscribers. CFTC Chairman Michael Selig said that “the CFTC’s registered negotiations 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,” adding that New York is “the latest state to ignore federal law and set a decades-old precedent.”
New York CFTC Case Expands Six-District War
As crypto.news reported, the action in New York was directly triggered by the state attorney general suing Coinbase and Gemini earlier that week, claiming that their market prediction platforms operate as unauthorized gambling without meeting the state’s gaming license requirements or minimum age restrictions. Attorney General Letitia James and Governor Kathy Hochul responded to the CFTC’s lawsuit by saying that “New York’s gambling laws are designed to protect consumers, whether they are betting in a betting market or a casino,” and vowed to continue to defend the state’s law in court. As crypto.news was written, the CFTC had already sued Arizona, Connecticut, and Illinois in early April, arguing that those states were making “violent and overzealous efforts to circumvent the CFTC,” with the addition of New York making it the fourth direct defendant. The CFTC’s core legal argument is that futures contracts are classified as exchanges under the Commodity Exchange Act, which gives the federal agency exclusive powers and preempts any federal gambling regulation.
Third Circuit Decision Makes New York’s Position Difficult
The CFTC’s case against New York comes on the heels of an important federal precedent. As crypto.news tracked, the US Third Circuit Court ruled in April that New Jersey cannot prevent Kalshi from offering contracts for sports-related events, finding that the Commodity Exchange Act and the CFTC have exclusive jurisdiction over those markets. That decision strengthened the federal preemption argument the CFTC is now using against New York. Tennessee courts have similarly issued temporary injunctions barring federal enforcement against Kalshi. The New York case will now be decided in federal district court, where the Third Circuit’s reasoning, while not binding, carries significant persuasive weight. A loss for New York could prompt other states to stop enforcing similar measures, while a victory for New York would likely accelerate the conflict at the Supreme Court.
What We Mean Solution to Prediction and Crypto Markets
The poles extend beyond the immediate groups. As crypto.news pointed out, the lawsuit in New York against Coinbase and Gemini demanded at least $2.2 billion in fines from Coinbase and $1.2 billion from Gemini, making financial exposure from the enforcement of a possible situation for small operators market forecasts. Wisconsin also sued Polymarket, Kalshi, and Robinhood, seeking to deprive Wisconsin residents of their profits. If the CFTC is successful in all of its state cases, futures markets will operate under a single federal regulatory framework without state-by-state licensing requirements, a framework that would greatly expand their marketable reach. If the states pass, speculative markets would face 50 different regulatory areas, effective only in states that allow them.
A coalition of US party members has proposed separate legislation to ban sports and casino-style contracts in the CFTC-regulated speculation markets, meaning that even a CFTC victory in court could be overturned by Congress if the political will prevails.
