A federal judge in New York has raised doubts about the ability of the Commodity Futures Trading Commission (CFTC) to build a strong enough case to stop the state from enforcing its gambling laws against prediction market operators.
Supreme Court Could Settle Prediction Market Regulatory Dispute
The arguments were heard on September 14 by US District Judge Lorna G. Schofield in the Southern District of New York. The hearing concerned the CFTC’s motion for a preliminary injunction to stop New York from enforcing actions against federally regulated event-contract platforms.
The dispute is over whether sports and other event contracts are financial derivatives under federal law or gambling products regulated by the states.
CFTC lawyer Jordan Minot argued that the contracts are swaps under the Commodity Exchange Act (CEA). He said Congress has given the federal agency exclusive authority over such products, and allowing New York to intervene would create uncertainty as related cases move through the courts.
However, Schofield said he was worried about the odds of the CFTC winning. She pointed to conflicting rulings by federal appeals courts and asked why the court should grant an injunction when other judges have rejected similar requests.
The legal split has emerged as a key element in the larger battle over prediction markets. The Third Circuit has supported the idea that event contracts fall under the CEA, and the Ninth Circuit recently ruled that sports contracts offered by Kalshi can be defined as wagers under state gambling laws. The Supreme Court has been asked to decide the dispute.
AGA and State Officials Challenge CFTC Prediction Market Approach
New York has already taken action against several prediction-market firms. Attorney General Letitia James has targeted Coinbase Financial Markets, Gemini Titan and Kalshi, saying their event contracts amount to unlicensed gambling. In those cases, the state is seeking monetary penalties and other remedies.
The American Gaming Association (AGA) has weighed in on the debate as well. The casino industry group filed a court document opposing the CFTC request for an injunction, arguing that sports prediction contracts should be subject to the same rules as licensed sportsbooks.
The AGA has highlighted differences in licensing, taxation, age limits, advertising, and responsible-gambling regulations. It also cited the $1.32 billion in sports-betting tax revenue generated by New York in 2025 as part of its argument for maintaining state oversight.
CFTC’s stance has attracted broader pushback from state officials. In July, 44 state attorneys general told the agency that the CEA does not give it authority over contracts for sports-related events. The coalition said sports betting has been under state control and objected to the CFTC’s effort to expand its regulatory powers.
Consequently, the New York case could have implications beyond the companies involved today. A ruling in favor of the CFTC could restrict states’ ability to regulate federally registered prediction markets, while a ruling in favor of New York could bolster state power over contracts related to sports.
Schofield did not issue a ruling after the hearing. The broader legal fight continues in several federal courts, while her ruling on the preliminary injunction is pending.
A federal judge in New York has raised doubts about the ability of the Commodity Futures Trading Commission (CFTC) to build a strong enough case to stop the state from enforcing its gambling laws against prediction market operators. Supreme Court Could Settle Prediction Market Regulatory Dispute The arguments were heard on September 14 by US