CFTC Escalates Legal Fight Over Prediction Markets

The Commodity Futures Trading Commission (CFTC) has intensified its legal campaign over prediction markets by launching new actions against New York and stepping into an ongoing dispute in Massachusetts. The federal regulator argues that it alone holds authority over these markets, setting up a broader conflict with state governments attempting to apply their own gambling laws.

The latest developments mark an expansion of the agency’s courtroom strategy, which already includes similar disputes in Arizona, Connecticut, and Illinois. At the center of the conflict is whether event-based financial contracts—often tied to sports or elections—fall under federal derivatives law or state-level gambling regulations.

Federal Lawsuit Targets New York Authorities

The CFTC, alongside the U.S. Department of Justice, filed a complaint on April 24 in the U.S. District Court for the Southern District of New York. The lawsuit names several state officials, including Governor Kathy Hochul, Attorney General Letitia James, and members of the New York State Gaming Commission.

Federal regulators are asking the court to confirm that the CFTC has exclusive jurisdiction over event contracts and to block New York from enforcing its gambling laws against federally regulated exchanges. The agency is also seeking a permanent injunction to prevent further state action.

The dispute follows a series of confrontations between New York and prediction market operators. In October 2025, the state gaming regulator issued a cease-and-desist order to Kalshi, claiming its sports-related contracts amounted to illegal wagering without proper licensing. Kalshi responded by filing its own federal lawsuit.

More recently, New York filed legal action against Coinbase and Gemini, aiming to halt their involvement in offering trading tied to sports and election outcomes. The state is also pursuing substantial financial penalties.

The CFTC argues that such moves interfere with federally regulated markets. In its complaint, the agency stated, “Unless restrained and enjoined by the Court, defendants are likely to continue their attempts to subvert federal law and the exclusive jurisdiction to regulate event contract swaps conferred on the CFTC by Congress.”

It added, “Defendants’ aggressive enforcement of their preempted state laws causes irreparable harm to the federal plaintiffs because it is disrupting the operation of federally regulated markets and impairing the CFTC’s ability to apply and enforce its own regulations and the federal CEA. Absent an injunction, the United States and the CFTC will suffer irreparable harm.”

State Officials Push Back on Federal Claims

New York leaders have defended their position, maintaining that their laws are designed to protect residents. In a joint response, Governor Hochul and Attorney General James criticized the federal government’s approach.

“New York’s gambling laws are designed to protect consumers, whether they are placing bets in a prediction market or a casino,” they wrote, according to SBC Americas. “When gambling platforms, including prediction markets, violate our laws, we will not hesitate to hold them accountable. We look forward to continuing to defend our laws in court.”

State officials have also voiced broader concerns about the spread of prediction markets into areas traditionally regulated as sports betting. Regulatory leaders in New York have suggested they may review whether licensed operators should maintain ties to platforms offering such contracts.

Massachusetts Case Draws Federal Support

At the same time, the CFTC has entered a separate legal fight in Massachusetts by filing an amicus brief supporting Kalshi. The case follows a preliminary injunction issued earlier this year that favored the state’s position against the company.

The federal agency’s filing seeks to reinforce its interpretation of the Commodity Exchange Act, which it says grants it sole oversight of derivatives markets, including prediction-based contracts.

Massachusetts has already seen notable activity in its regulated sports betting sector. The state reported $227.2 million in gross gaming revenue during the first quarter of 2026, generating $44.4 million in tax revenue. Officials are also exploring expansion, opening a window for new operators to apply for licenses.

Ongoing Legal Strategy Across States

The actions in New York and Massachusetts form part of a broader push by the CFTC to defend its regulatory role nationwide. The agency has repeatedly argued that state-level enforcement efforts threaten a unified federal framework.

CFTC Chair Michael Selig has been outspoken about the issue, warning that the agency will continue to challenge states in court. “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,” Selig said. “New York is the latest state to ignore federal law and decades of precedent by seeking to enforce state gambling laws against CFTC-registered exchanges. As I’ve said before, the CFTC will not allow overzealous state governments to undermine the agency’s longstanding authority over these markets.”

He reiterated the agency’s stance in relation to ongoing disputes elsewhere, stating, “Some states continue to pursue ever-escalating, illegal enforcement actions against CFTC-regulated exchanges, despite rulings from multiple courts halting those efforts. Congress has entrusted the CFTC with the sole authority to regulate commodity derivatives markets, including prediction markets. To any state that seeks to nullify federal law and seize authority over these markets, I say again: we will see you in court.”

As legal battles continue to unfold across multiple jurisdictions, the outcome of these cases could shape how prediction markets operate in the United States and determine whether federal or state authorities ultimately control their future.