CFTC sues New York State: Defend the federal exclusive jurisdiction over prediction markets

The U.S. Commodity Futures Trading Commission (CFTC) filed a lawsuit against the State of New York in the U.S. District Court for the Southern District of New York on 4/24, seeking a court ruling that affirms the CFTC’s exclusive federal jurisdiction over event contracts and issuing a permanent injunction prohibiting New York State from enforcing state laws that have been preempted by federal law against CFTC-registered entities. According to CFTC’s 4/24 press release (No. 9218-26), this is the CFTC’s similar litigation in recent months against a fourth state—Arizona, Connecticut, Illinois, and New York—with the aim of fully consolidating, from a federal standpoint, the enforcement expansion by states against prediction markets.

CFTC Chair Selig’s Clear Position

In the press release, CFTC Chair Michael S. Selig said that CFTC-registered exchanges are “facing a flood of lawsuits filed by various states,” which seek to limit U.S. people’s access to event contracts and “erode the CFTC’s single regulatory jurisdiction over prediction markets.” The press release explicitly frames this lawsuit as part of “defending the federal regulatory framework,” rather than as a dispute involving case-by-case controversies with state governments.

New York State has previously sent multiple cease-and-desist letters to CFTC-registered entities and has also initiated civil enforcement proceedings regarding specific platforms. The CFTC believes these state-level actions have constituted an affront to federal law.

Direct Impact on Operators Like Polymarket, Kalshi, and Others

The core beneficiaries of this case are prediction market operators such as Polymarket, Kalshi, and others that are already registered with the CFTC or operate under the DCM (designated contract market) framework. If the federal court supports the CFTC’s arguments, New York State will not be able to restrict these platforms’ provision of contracts within the state on the grounds that they are “equivalent to gambling.” For industry participants, this is a key turning point for how regulation in the U.S. is moving in the opposite direction—after Brazil’s 4/24 sweeping ban on 27 prediction platforms including Polymarket and Kalshi: offshore is shut down, while the home market is protected by the federal government.

The legal key concept in this case is “field preemption”—when federal law has completely covered the regulation of a certain type of market activity, state law may not add to or replicate additional regulations. The CFTC argues that the Commodity Exchange Act has established a complete framework for event contracts, so states cannot pursue separate claims in the name of gambling laws, consumer protection laws, and the like. If this argument is adopted by the court, it will provide near-monopoly-level regulatory certainty for the prediction market industry within the United States.

Industry Timing and Sequencing

This case occurs at the most sensitive time for the prediction market industry. Earlier this week, the DOJ charged the commander of a U.S. military special forces unit with profiting $400k from bets on Polymarket using classified information, prompting questions from the public about the industry’s internal monitoring and oversight capabilities; Warsh, a nominee for Fed chair, also filed a disclosure stating he holds equity in Polymarket. The CFTC’s move against New York State at this sensitive juncture sends a clear signal that “regulatory power resides at the federal level”—to both state governments and the operators themselves.

For readers in Taiwan and across Asia-Pacific, the direction of the ruling in this case will directly affect the service models that Polymarket and Kalshi use for international users. If exclusive federal jurisdiction is confirmed, these platforms will likely focus even more on expanding regulatory compliance within the U.S., and their retreat from overseas markets (such as the recently banned Brazil) may become more evident.

This article, “CFTC Sues New York State: Defending Federal Exclusive Jurisdiction Over Prediction Markets,” first appeared on Chain News ABMedia.