The Commodity Futures Trading Commission has filed a lawsuit against New York and is joining Kalshi in its legal squabble with Massachusetts for interfering with CFTC-licensed prediction markets’ ability to offer sports event contracts in their respective jurisdictions, prompting many frustrated bettors to turn to trusted offshore betting sites for uninterrupted action.
CFTC Punches Back
Under the direction of CFTC Chairman Michael Selig, the federal agency filed a lawsuit late last week in the U.S. District Court for the Southern District of New York against the Empire State, the state’s Attorney General Leticia James, and its gaming commission.
The action comes after New York authorities issued cease-and-desist orders to prediction market operators for offering sports event contracts that are considered the purview of the state’s licensed mobile sportsbooks.
Unlike the sportsbooks, the prediction markets do not pay taxes to the states in which they operate, as they contend they are allowed to operate unencumbered in all 50 states due to their federal license under the CFTC. CFTC-regulated trading exchanges, Coinbase and Gemini Titan, were the latest to receive lawsuits by New York, threatening both with punitive damages in the billions of dollars.
Attorney General James cites a New York law that “empowers the office to bring a special proceeding for injunctive relief, restitution, and damages whenever a person or business engages in ‘repeated or persistent fraud or illegality.’”
She also added that her office is charged with protecting New Yorkers, writing in a statement, “Gambling by another name is still gambling, and it is not exempt from regulation under our state laws and Constitution. Gemini and Coinbase’s so-called prediction markets are just illegal gambling operations, exposing young people to addictive platforms that lack the necessary guardrails. My office is taking action to protect New Yorkers and stop these platforms from violating the law.”
The culmination of this legal warfare waged by the Empire State spurred CFTC Chairman Michael Selig to take action.
“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,” Selig said. “As I’ve said before, the CFTC will not allow overzealous state governments to undermine the agency’s longstanding authority over these markets.”
Mass Casualties
Neighboring state Massachusetts did not escape the wrath of Selig and the CFTC, as it recently joined prediction market platform Kalshi in its legal battle against Massachusetts officials who recently scored a preliminary injunction against Kalshi.
The CFTC recently interjected itself in the Massachusetts vs. Kalshi case by filing an amicus brief in the Massachusetts Supreme Judicial Court. For those unfamiliar, an amicus brief, meaning “friend of the court” (amicus curiae), is a lawsuit filed by non-parties that have a vested interest in the outcome. While these high-profile legal battles over prediction markets continue to make headlines, we always remind our readers to brush up on how to gamble responsibly before getting involved in the action.
The CFTC has detailed its longstanding federal authority that allows its licensees to trade unabated in all 50 states. The agency contends that the states interfering with that authority lack the legal wherewithal to do so.
“Some states continue to pursue ever-escalating, illegal enforcement actions against CFTC-regulated exchanges, despite rulings from multiple courts halting those efforts,” Selig said. “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.”
