CFTC sues New York over regulation of prediction markets

The Commodity Futures Trading Commission filed suit Friday in Manhattan federal court, accusing New York state officials of overstepping by targeting prediction markets that the agency says fall under federal derivatives law. The complaint follows Attorney General Letitia James’s April 21 lawsuits against Coinbase and Gemini, which accuse the platforms of offering illegal gambling products in New York.

The CFTC argues that event contracts used in prediction markets are a form of commodity derivative and therefore subject to federal oversight. The agency says the April 21 lawsuits interfere with the national regulatory framework Congress created for derivatives. The complaint notes the CFTC filed similar cases on April 2 against Arizona, Connecticut and Illinois to challenge state restrictions on prediction markets.

James’s lawsuits claim Coinbase and Gemini offered event contracts without New York State Gaming Commission licenses and that the products are “quintessentially gambling” because users cannot control outcomes and chance can determine results. Her office also cited age concerns, saying the platforms allowed users aged 18 to 20 to participate while New York requires mobile sports-betting customers to be at least 21.

New York’s attorney general and Governor Kathy Hochul released a joint statement framing the issue as consumer protection. The statement read, “New York’s gambling laws are designed to protect consumers, whether they are placing bets in a prediction market or a casino. When gambling platforms, including prediction markets, violate our laws, we will not hesitate to hold them accountable.” The statement also accused the federal administration of favoring large companies over local consumers.

Industry figures named in the litigation include Gemini, led by brothers Tyler and Cameron Winklevoss. Kalshi, another operator of event markets, filed a suit last October against the New York Gaming Commission to block a state ban on event contracts; that case remains pending.

The court fight coincides with broader concern about government employees betting on event markets. President Donald Trump said he would review federal employee activity on betting sites after authorities arrested a U.S. Army soldier in a case linked to an operation involving Venezuelan leader Nicolas Maduro and alleged winnings of $400,000. Trump told reporters he has reservations about event-betting platforms and compared the landscape to a global increase in betting activity.

The litigation will test whether states may regulate or ban event contracts or whether federal derivatives law preempts state action. Federal judges will consider competing claims about the scope of federal authority over commodity derivatives and the reach of state consumer-protection and gambling statutes as the cases proceed in court.