Federal Regulators Sue New York in Escalating Battle Over Prediction Market Authority

The Commodity Futures Trading Commission (CFTC) filed suit against New York in the US District Court for the Southern District of New York on April 24.

The state becomes the fourth that the federal agency has taken to court in three weeks over regulation of prediction market apps.

The action is the last round in the recent clash between state and federal levels and follows nearly identical suits the CFTC filed against Arizona, Connecticut, and Illinois on April 2. These are all built around the same core argument: that federal law grants the agency exclusive jurisdiction over event contracts, and that state gambling enforcement against CFTC-registered exchanges is legally preempted.

The New York lawsuit was triggered by the state attorney general's April 21 suits against Coinbase Financial Markets and Gemini Titan, which accused both companies of running unlicensed gambling operations. The CFTC's complaint in Manhattan federal court argued that those state enforcement actions intrude on the regulatory framework Congress built for commodity derivatives markets.

The agency is seeking a declaratory judgment confirming federal primacy and a permanent injunction blocking New York from pursuing its own enforcement path against federally registered platforms. CFTC Chairman Michael Selig framed the state actions collectively as a threat to a uniform national market for event contracts, warning against a fragmented patchwork of conflicting state rules.

New York joined a coalition of 38 attorneys general the same day, filing an amicus brief in Massachusetts' Supreme Judicial Court, urging that court to uphold a preliminary injunction against Kalshi. Courts have split on the issue: the Third Circuit sided with Kalshi over New Jersey, while judges in Nevada, Maryland, Ohio, and Massachusetts have ruled against the platform.

New York fires back, citing consumer harm

New York shows no sign of retreat in the face of the federal lawsuit. Attorney General Letitia James and Gov. Kathy Hochul issued a joint statement on April 24 defending the state's position, framing the CFTC's legal intervention as a case of the Trump administration shielding corporations at the expense of ordinary consumers.

The state's original April 21 suits against Coinbase and Gemini laid out a detailed consumer harm argument that goes beyond the preemption debate. Both platforms, according to the complaints, allowed users between the ages of 18 and 20 to place bets, a direct violation of New York law, which sets the mobile wagering floor at 21.

The filings also pointed out that neither company pays the roughly 51% gross revenue tax that licensed New York sportsbooks and casinos are required to remit to the state, creating what the attorney general characterized as an unlevel playing field.

The suits are seeking consumer refunds, forfeiture of illegal profits, and civil penalties totaling three times the amount of those profits. James had sought minimum damages of $2.2 billion from Coinbase and $1.2 billion from Gemini.

Gov. Hochul had separately signed Executive Order 60 the day after the suits were filed, prohibiting state employees from using nonpublic information obtained through official duties to trade on prediction market platforms.