U.S. and CFTC sue New York to block state enforcement against prediction markets

The Commodity Futures Trading Commission, joined by the United States, sued New York in federal court on Thursday, escalating a widening fight over who controls prediction markets. The case, filed April 24 in the U.S. District Court for the Southern District of New York, seeks to stop the state from applying its gambling laws to event contracts traded on platforms regulated by the CFTC, the federal agency that oversees U.S. derivatives markets.

In the complaint, filed as Case No. 1:26-cv-3404, the United States and the CFTC ask for a declaratory judgment that federal law gives the agency exclusive authority to regulate event contracts, and for a permanent injunction barring New York from enforcing state gambling laws against CFTC-registered exchanges and registrants. The defendants are the State of New York, Gov. Kathleen Hochul in her official capacity, Attorney General Letitia James in her official capacity, and the New York State Gaming Commission.

The immediate trigger, according to the federal complaint, was New York Attorney General James’ April 21 civil enforcement actions against Coinbase Financial Markets Inc. and Gemini Titan LLC in state court. Those suits allege the companies are operating illegal gambling under New York law and seek injunctions, restitution for customers, penalties and damages. In announcing those cases, James said, “Gambling by another name is still gambling, and it is not exempt from regulation under our state laws and Constitution.”

The CFTC says New York’s actions directly conflict with the Commodity Exchange Act, the federal law governing commodities and derivatives markets. CFTC Chairman Michael S. Selig said in the agency’s April 24 announcement: “CFTC-registered exchanges have faced an onslaught of state lawsuits seeking to limit Americans’ access to event contracts and undermine the CFTC’s sole regulatory jurisdiction over prediction markets. 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.”

The companies at the center of the dispute all have ties to the CFTC’s regulatory system, according to the complaint. KalshiEX LLC received CFTC designation as a contract market on Nov. 3, 2020. Gemini Titan LLC received the same designation on Dec. 10, 2025. Coinbase Financial Markets is registered with the CFTC as a futures commission merchant, and had a partnership with Kalshi that let Coinbase customers trade event contracts listed on Kalshi’s exchange. The complaint also cites an earlier New York move: a cease-and-desist letter the Gaming Commission sent to Kalshi in October 2025.

Thursday’s filing is part of a broader federal campaign against state gambling enforcement in this area. The CFTC said it brought similar suits against Arizona, Connecticut and Illinois on April 2. The agency’s complaint in the New York case says that, as of the filing, at least eight CFTC-regulated designated contract markets had self-certified more than 3,000 event contracts. Event contracts are prediction-market products tied to real-world outcomes, such as whether a particular event will happen.

The most important recent legal backdrop came from a separate case involving Kalshi and New Jersey. On April 6, a divided three-judge panel of the 3rd U.S. Circuit Court of Appeals upheld a preliminary injunction blocking New Jersey from enforcing state gambling laws against Kalshi’s sports-related event contracts. The panel said Kalshi was likely to succeed on its argument that the Commodity Exchange Act preempts state gambling law in that context. But that ruling was preliminary, not a final decision on the merits. The core question remains the same in New York and elsewhere: whether prediction markets are regulated exclusively in Washington under federal commodities law, or whether states can treat them as unlawful gambling.