The Commodity Futures Trading Commission (CFTC) has filed a lawsuit against New York to prevent the state from applying gambling laws to federally regulated prediction market platforms, intensifying a dispute over who has the authority to oversee these products.
In complaint filed in the United States District Court for the Southern District of New York, the CFTC argued that federal law gave it exclusive authority over these markets, asking the court to grant a declaratory judgment and a lasting injunction against New York’s enforcement actions.
“CFTC-registered exchanges have faced an avalanche of state lawsuits seeking to limit Americans’ access to event contracts and challenge the CFTC’s exclusive regulatory jurisdiction over forecast markets,” said CFTC Chairman Michael Selig.
Earlier this week, New York filed lawsuits against Coinbase and Gemini, claiming their offerings violate state gambling laws. The state has also attacked Kalshi before, ordering him to withhold some of his sports-related contracts.
Related: Kalshi, Polymarket among 27 forecasting platforms banned in Brazil
States say federal law does not legalize sports betting
On Friday, a coalition of 37 states and Washington filed an amicus brief supporting Massachusetts in its case against Kalshi, urging the Massachusetts Supreme Court to reject Kalshi’s argument that federal law allows him to offer sports betting nationwide without complying with state laws.
Kalshi says the betting products it offers are “swaps” regulated by a federal agency under a 2010 financial law. The states argue that the law was never intended to legalize or control sports betting and does not expressly override state authority that has historically regulated gambling.
37 states support Massachusetts in amicus brief. Source: Governor of New York
States also argue that removing state oversight would weaken protections. State laws currently regulate issues related to licensing, age restrictions, fraud prevention and gambling addiction, all of which are areas not covered by federal financial regulations.
Related: A US appeals court upholds a decision preventing enforcement of the New Jersey verdict against Kalshi
States step up attacks on prediction markets
In recent months, government officials have taken a more aggressive stance toward forecasting markets, issuing cease-and-desist letters and taking legal action against companies that offer forecasting contracts.
States such as Arizona, Connecticut and Illinois are seeking to enforce gambling laws against prediction platforms. Earlier this month, a Nevada judge extended a ban preventing Kalshi from offering event-based contracts in the state, siding with regulators who say the products constitute unlicensed gambling.
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