CFTC Sues New York Over State Regulation of Prediction Markets

The Commodity Futures Trading Commission has taken New York to federal court in a fight that could decide whether prediction markets are governed by state gaming law or by Washington’s derivatives watchdog. In a complaint filed April 24 in the Southern District of New York, the agency asked for a declaration that federal law gives it exclusive authority over event contracts and for a permanent injunction stopping New York from enforcing laws it says are preempted against CFTC registrants.

The lawsuit lands at the center of a fast-growing market that has moved from the margins of finance into mainstream political and consumer debate. Prediction markets, also known as event contracts, let people bet on outcomes ranging from sports to elections. The CFTC says those markets have existed in U.S. regulated venues for more than two decades, tracing their modern federal treatment back to the Iowa Electronic Markets at the University of Iowa, which the agency first officially recognized in 1992. After the 2008 financial crisis, Congress expressly gave the CFTC comprehensive authority over commodity-based event contracts, a history the agency says New York is now trying to override with state gambling enforcement.

New York’s case is built around its April 21 lawsuit against Coinbase Financial Markets, Inc. and Gemini Titan, LLC. Attorney General Letitia James called the companies’ prediction products illegal, unlicensed gambling operations and sought fines, forfeiture of illegal profits and restitution. Her office argued that the platforms should have obtained state gaming licenses and said they were accessible to users ages 18 to 20 even though New York requires mobile sports bettors to be at least 21. The filings cite specific wagers, including whether the New York Knicks would win by more than 6.5 points, the February 8, 2026 Super Bowl, St. John’s against Providence on February 14, 2026, and St. John’s against UConn on February 25, 2026.

The companies moved quickly into the market. Coinbase announced its prediction markets on December 17, 2025 and said they were live in all 50 states on January 28, 2026. Gemini said on December 10, 2025 that it planned to enter the space and later said Gemini Predictions was live across all 50 states on December 15, 2025. The CFTC has already shown it is willing to defend the sector aggressively, filing similar suits against Arizona, Connecticut and Illinois. It also said in February that it had issued an enforcement advisory after public release of two cases involving misuse of nonpublic information and fraud in event contracts traded on KalshiEX LLC.

The broader stakes reach beyond two companies and one state. KalshiEX has already sued New York’s gaming commission over a possible ban, showing how quickly the legal fight is spreading across firms and courts. If the CFTC prevails, prediction markets could keep expanding under a federal framework built for financial instruments. If New York’s approach holds, more states could treat them as gambling products, leaving the industry with a fractured regulatory map and a far less certain future.