CFTC Sues New York in Latest Prediction Markets Battle
The CFTC is suing New York in one of its latest battles against state interference in prediction markets.
The move came after the state of New York tried to enforce state gambling laws on online prediction markets. The Commodity Futures Trading Commission maintains that it can regulate prediction markets (which it regards as financial contracts), not the individual states.
At a Glance:
- New York had clamped down on crypto exchanges
- Coinbase and Gemini began offering prediction markets
- Commodity Futures Trading Commission argues federal rules govern prediction markets
- CFTC challenge follows similar moves against Arizona, Illinois, other states
Major crypto exchanges in New York’s firing line
New York has issued cease-and-desist letters to two cryptocurrency platforms, Gemini and Coinbase, which have recently introduced prediction markets.
In a major app overhaul last year, Coinbase added prediction markets and stock trading to its platform. Coinbase aims to evolve into a financial trading platform, crypto exchange, and prediction market app all in one.
The Empire State allows licensed sportsbooks, but it regards predictions as a form of betting. Therefore, any online platform offering prediction markets must apply for the appropriate sports betting license.
New York is also considering cracking down on underage and problem gambling through a proposed implementation of biometric verification processes.
Federal law ‘grants exclusive authority’, CFTC claims
The CFTC is looking for a permanent injunction against New York. In a press statement issued before the weekend, CFTC’s Michael S. 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.”
New York joins Arizona, Illinois, Connecticut
The battle between the CFTC and states with regulated sports betting is heating up in 2026. In March, the CFTC sued three states for attempting to regulate prediction markets, and this week added Wisconsin to its list of lawsuits.
Regulators in Arizona, Illinois, and Connecticut issued the now-familiar cease-and-desist letters to operators offering “illegal” markets.
The commission argued that it had exclusive regulatory authority over predictions. In a barbed attack on state gambling commissions, the CFTC also argued that fragmented state regulations cause “poorer consumer protection”.
Kalshi case highlights ongoing federal position
Prediction markets may yet brush off this latest threat to their existence in the U.S. In early April, a federal appeals court ruled that New Jersey couldn’t regulate Kalshi, America’s largest predictions platform.
One month later, a federal judge in Arizona blocked the state's criminal case against Kalshi.
However, there is a key existential problem for states trying to crack down. Under strict gambling laws, most states restrict sports betting to those 21 or older. Sites like Polymarket and Coinbase set a minimum age of 18.
Additionally, prediction markets have blanket coverage across all 50 U.S. states. Expect a few more days in court for state regulators in the weeks and months to come.
