CFTC sues New York over prediction markets

The Commodity Futures Trading Commission sued New York on April 24 to stop the state from applying gambling laws to federally registered prediction-market exchanges. (cftc.gov) The agency filed in the U.S. District Court for the Southern District of New York and asked for a declaratory judgment plus a permanent injunction. It said federal law gives the CFTC exclusive authority over event contracts listed on CFTC-registered markets. (cftc.gov) The defendants include Governor Kathy Hochul, Attorney General Letitia James, the New York State Gaming Commission, Executive Director Robert Williams and six commissioners. The CFTC said New York had used cease-and-desist letters and civil suits against CFTC-registered entities. (theblock.co) (cftc.gov) Prediction markets let users buy contracts tied to whether an event happens, and sports versions can look a lot like a bet on a team or score. The legal fight is over who regulates them: state gambling agencies or the federal derivatives regulator. (mass.gov) (cftc.gov) Massachusetts has become the test case. Attorney General Andrea Joy Campbell sued Kalshi on September 12, 2025, saying its sports event contracts were unlicensed sports wagers, and a judge on January 20, 2026 barred Kalshi from offering those contracts to Massachusetts customers while the case proceeds. (mass.gov 1) (mass.gov 2) On the same day New York was sued, the CFTC also told the Massachusetts Supreme Judicial Court that it has exclusive jurisdiction over prediction markets. That filing said the agency had already sued Arizona, Connecticut, Illinois and New York over state efforts to regulate the contracts as gambling. (cftc.gov 1) (cftc.gov 2) New York moved in the opposite direction that day. Letitia James joined 37 other attorneys general in an amicus brief urging Massachusetts’ top court to keep Kalshi under state gambling rules, making the coalition 38 states plus the District of Columbia. (theblock.co) (ag.ny.gov) That brief said Kalshi users wagered more than $1 billion a month in 2025 and that sports made up about 90% of volume in some months. The attorneys general argued those contracts are gambling products that still need state licenses and consumer protections. (theblock.co) (ag.ny.gov) Massachusetts has said Kalshi allowed users ages 18 to 21 to trade sports contracts even though the state’s legal age for online sports betting is 21. The state also said Kalshi lacked the responsible-gambling controls required of licensed operators. (mass.gov) The New York case now puts that jurisdiction fight squarely before a federal judge in Manhattan. For now, the core question is unchanged: whether a sports event contract is a federally regulated derivative, a state-regulated wager, or both. (cftc.gov 1) (cftc.gov 2)