As Someone Who Has Spent Decades Advising on Gaming Regulation, the CFTC’s Lawsuit Against New York and Amicus Brief in Massachusetts Mark a Defining Moment for Prediction Markets
A Long-Standing Tension Reaches Federal Court
As someone who has spent decades observing the evolution of gaming regulation across federal, state, and tribal jurisdictions, I see the Commodity Futures Trading Commission’s latest actions as more than procedural housekeeping. They represent a structural assertion of federal preemption under the Commodity Exchange Act against state attempts to treat event contracts as illegal gambling.
On April 24, 2026, the CFTC filed suit in the U.S. District Court for the Southern District of New York against New York’s enforcement campaign. The agency simultaneously filed an amicus brief in the U.S. District Court of Massachusetts supporting Kalshi in its dispute with state regulators. CFTC Chairman Michael S. Selig made the agency’s position unmistakable: Congress granted the CFTC exclusive authority over these markets, and the agency will defend that mandate in court.
This is the latest chapter in a multi-year contest between federal derivatives oversight and state gaming commissions seeking tax revenue, licensing fees, and consumer protections. The implications stretch far beyond New York and Massachusetts.
The Mechanics of Federal Preemption Under the Commodity Exchange Act
The CFTC’s filings rest on a clear reading of the Commodity Exchange Act. Congress designed the statute to create a uniform national framework for commodity derivatives, including event contracts that function as prediction markets. That framework explicitly preempts conflicting state laws when applied to CFTC-registered exchanges.
Chairman Selig stated in the agency’s announcement: “Some states continue to pursue ever-escalating, illegal enforcement actions against CFTC-regulated exchanges, despite rulings from multiple courts halting those efforts. Congress has entrusted the CFTC with the sole authority to regulate commodity derivatives markets, including prediction markets.”
The CFTC’s position is not novel legal theory. The agency previously filed an amicus brief in the Ninth Circuit reaching the same conclusion, and the Third Circuit upheld an injunction blocking New Jersey from enforcing gambling laws against Kalshi in early April 2026. Multiple courts have now blocked state enforcement efforts.
The CFTC also filed parallel preemption suits against Arizona, Connecticut, and Illinois on April 2, 2026. The New York filing is part of a coordinated multi-state federal litigation push, not an isolated enforcement action.
New York’s Aggressive Enforcement Campaign
New York’s actions illustrate the stakes for operators and the political incentives at play. The New York State Gaming Commission has issued multiple cease-and-desist letters to prediction market platforms. Attorney General Letitia James sued Coinbase and Gemini on April 21, 2026, seeking compensatory damages totaling approximately $3.4 billion combined from the two defendants.
The complaints allege that the platforms allowed users between 18 and 20 years of age to participate despite New York’s 21-and-over requirement for online sports betting, permitted betting on games involving New York college teams, and operated without a license from the Gaming Commission, thereby avoiding the taxes and oversight required of licensed sportsbooks and casinos.
Kalshi itself filed suit against members of the New York State Gaming Commission in October 2025, just two days after receiving its own cease-and-desist letter. The CFTC has now joined that fight on the side of federal jurisdiction.
From a state perspective, the grievance is understandable. Licensed operators in New York pay substantial taxes and regulatory fees. Prediction markets operating under CFTC registration appear to many state officials as unregulated competitors siphoning revenue and evading consumer protection mandates. Yet the federal statute was written to prevent exactly this patchwork of conflicting state rules.
Massachusetts, the 37-State Coalition, and Tribal Sovereignty
The amicus brief filed in Massachusetts reinforces the same preemption argument in support of Kalshi. Massachusetts Attorney General Andrea Campbell’s office has pursued similar enforcement, viewing prediction markets as de facto sports betting that must comply with state licensing and taxation.
Notably, on the same day the CFTC filed in New York, a coalition of 37 state attorneys general filed an amicus brief on the opposite side in the Massachusetts case, arguing that federal derivatives law was not intended to legalize sports betting and does not clearly override state jurisdiction over gambling. The legal landscape is genuinely contested, not a one-sided federal march toward preemption.
This fight cannot be separated from the question of tribal sovereignty. Tribal gaming sovereignty is a foundation, not a footnote. Tribes operate under a unique federal trust relationship that predates many modern regulatory frameworks. Any comprehensive resolution of prediction market authority must include meaningful tribal consultation, and the CFTC has signaled through prior closed-door dialogues that it understands this.
Operational and Compliance Risks for Multi-State Operators
For prediction market platforms and their client-partners, the regulatory politics create material operational risk. A company registered with the CFTC must still navigate cease-and-desist orders, lawsuits seeking billions in damages, and the threat of injunctions in individual states.
Compliance teams face difficult choices. Blocking trades based on user geography risks fragmenting liquidity and harming market quality. Ignoring state demands invites escalating enforcement, including potential criminal referrals. The age-verification, college-sports, and tax-collection issues cited by Attorney General James add layers of complexity that pure CFTC registration does not automatically resolve.
Kalshi, Polymarket, Robinhood, and others have built national platforms on the premise that CFTC oversight provides a shield. The current litigation tests whether that shield holds against determined state attorneys general and the 37-state coalition now formally aligned on the state side.
The Bottom Line
The CFTC’s lawsuit against New York and its amicus brief in Massachusetts represent a deliberate escalation to protect federal authority granted by Congress under the Commodity Exchange Act. Chairman Selig has drawn a clear line: states cannot nullify federal law through gambling statutes. The Third Circuit’s recent injunction in the Kalshi-New Jersey case strengthens the federal position, while the 37-state AG amicus brief shows the state side is organized and well-resourced.
For operators, the near-term path requires disciplined compliance strategies that respect both CFTC registration and state demands where they can be reconciled without undermining federal preemption. Tribal governments must have a genuine seat at the table as these precedents are set. The next several months of litigation will clarify much, but client-partners navigating these waters should treat regulatory ambiguity as a core planning input rather than an excuse for delay.
The markets are moving. The law is catching up.
