The U.S. Commodity Futures Trading Commission (CFTC) filed suit against the State of New York on Friday in Manhattan federal court, accusing New York Attorney General Letitia James of improperly intruding on the CFTC's exclusive authority to regulate commodity derivatives markets, including prediction markets.
In its complaint, the CFTC said the litigation brought by James on April 24 against Coinbase Financial Markets and Gemini Titan "intrudes on the exclusive federal scheme Congress designed" for oversight of commodity derivatives. The filing seeks to block the state-level legal action on the grounds that regulation of prediction market event contracts falls within the federal scheme.
The filing follows a pattern of recent CFTC litigation. On April 2, the commission filed similar suits challenging state actions in Arizona, Connecticut and Illinois. The CFTC's complaints argue that state attempts to police event contracts run counter to the agency's statutory jurisdiction.
Representatives from the New York attorney general's office did not provide an immediate comment on the CFTC's complaint.
What are prediction markets?
Prediction markets allow participants to place wagers on the outcome of discrete events - for example, sports results or elections - by buying and selling event contracts. The CFTC's complaint notes these markets are considered part of the commodity derivatives framework it supervises.
The article accompanying the CFTC's suit states that prediction markets saw increased attention after their real-time probability measures reportedly outperformed polling in forecasting the outcome of the 2024 U.S. presidential election.
New York's objections
Attorney General James has argued that Coinbase and Gemini should have secured licenses from the New York State Gaming Commission to operate prediction markets within the state. In her filings, James described the companies' event contracts as "quintessentially gambling," asserting that the outcomes are outside bettors' control or otherwise amount to games of chance.
James also raised concerns about age restrictions, objecting to Coinbase and Gemini allowing 18-to-20-year-olds onto their prediction market platforms despite a New York law that sets the minimum age for mobile sports betting at 21.
Industry responses and related litigation
Gemini's parent company, Gemini Space Station, is led by co-founders Tyler Winklevoss and Cameron Winklevoss, who serve as chief executive and president, respectively. Another market operator, Kalshi, previously sued the New York State Gaming Commission in October seeking to prevent a ban on event contracts; that case is still pending.
The CFTC's legal challenge frames the dispute as a conflict between federal regulatory prerogatives and state-level enforcement efforts, leaving open questions about how governance of prediction markets will be apportioned between state gaming authorities and the federal derivatives regulator.