New York is the latest state to allegedly encroach upon the CFTC’s exclusive jurisdiction over prediction markets, the derivatives regulator and Justice Department said in a complaint Friday.
The complaint centers on an October cease-and-desist letter sent to KalshiEx LLC about sports wagering on its platform in New York, as well as the state’s civil enforcement actions against
The CFTC and DOJ have filed similar lawsuits asserting the derivatives regulator’s jurisdiction against states including Illinois, Connecticut, and Arizona.
Those suits claim that the states are policing event contracts that fall under the CFTC’s purview, after their respective governors, gaming boards, and attorneys general sent their own cease-and-desist letters to companies including Kalshi and Crypto.com.
These escalations could push the dispute toward the Supreme Court or prompt Congress to more clearly codify prediction markets oversight with statutory language that distinguishes sports, election, or other event contracts from state-regulated betting and gambling.
State or Federal?
Despite assertions from New York officials that state law permits them to prohibit certain designated contract markets from operating, the alleged attempt to shut down federally regulated markets intrudes on the federal scheme that Congress set out for national swaps markets, according to the CFTC’s complaint in US District Court for the Southern District of New York.
“Unless restrained and enjoined by the Court, defendants are likely to continue their attempts to subvert federal law and the exclusive jurisdiction to regulate event contract swaps conferred on the CFTC by Congress,” the DOJ and CFTC said in the complaint. “Absent an injunction, the United States and the CFTC will suffer irreparable harm.”
New York state, Gov. Kathy Hochul (D), Attorney General Letitia James (D), the state’s gaming commission, and several of its senior officials are named defendants in the Commodity Futures Trading Commission’s lawsuit.
Enforcement Shifts
The CFTC has embraced prediction markets under the Trump administration and Chairman Michael Selig, an about-face from the stance adopted by Biden-era regulators, who had sought to bar sports and politics-related trades from prediction markets.
Selig, who sits alone atop the agency as its chairman with all other commissioner seats vacant, rescinded that proposal and promised to craft new rules for the industry, warning entities seeking to regulate prediction markets that the CFTC would “see you in court” in a video posted to X in February.
The DOJ and CFTC filed parallel actions Thursday in their first crackdown on insider trading involving event contracts alleging that an active-duty Army service member placed Polymarket wagers using classified information about military operations to capture former Venezuelan President Nicolás Maduro and his wife Cilia Flores.
US Army soldier Gannon Ken Van Dyke allegedly purchased more than 436,000 “yes” shares of a “Maduro Out by January 31, 2026?” contract to generate more than $400,000 in profits, according to the CFTC’s insider trading complaint.
The Friday lawsuit seeks a judgment that any state laws are preempted by the CFTC’s jurisdiction, as well as a permanent injunction preventing defendants from investigating or enforcing the challenged provisions.
Spokespeople for the state gaming commission, governor’s office, and attorney general’s office didn’t immediately respond to requests for comment.
The case is United States v. New York, S.D.N.Y., No. 1:26-cv-03404, complaint 4/24/26.
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