By Hank Russell
A week after Attorney General Letitia James filed a pair of lawsuits against a pair of prediction market firms, accusing them of promoting illegal gambling, the federal government hit back with a legal action of their own.
The Commodity Futures Trading Commission (CFTC) filed a lawsuit on April 24 in the U.S. District Court for the Southern District of New York to halt the state’s efforts to apply state gambling laws against CFTC-registered contract markets.
The agency accused New York of seeking to enforce state laws against entities registered with CFTC through cease-and-desist letters and civil enforcement suits. In its complaint against New York, the CFTC seeks a declaratory judgment that federal law grants it exclusive authority to regulate event contracts and requests a permanent injunction preventing the state from enforcing preempted state laws against its registrants.
As previously reported in Long Island Life & Politics, James sued Coinbase Financial Markets, Inc. and Gemini, Titan LLC for illegally running gambling operations in New York through their prediction market platforms. The lawsuits contend that Coinbase and Gemini have failed to obtain a license from the New York State Gaming Commission, sidestepping their obligation to pay taxes like licensed casinos and mobile sports gambling platforms do. Further, Coinbase and Gemini’s prediction markets are also available to users between the ages of 18 and 20, even though New York law states that a person must be at least 21 years old to participate in mobile sports betting.
“CFTC-registered exchanges have faced an onslaught of state lawsuits seeking to limit Americans’ access to event contracts and undermine the CFTC’s sole regulatory jurisdiction over prediction markets,” said CFTC Chairman Michael S. Selig. “New York is the latest state to ignore federal law and decades of precedent by seeking to enforce state gambling laws against CFTC-registered exchanges. As I’ve said before, the CFTC will not allow overzealous state governments to undermine the agency’s longstanding authority over these markets.”
Both James and Governor Kathy Hochul released the following statement in response to the federal government’s lawsuit against New York for enforcing the state’s gambling laws in actions against prediction market platforms.
“Once again, this administration is prioritizing big corporations over consumers and New Yorkers’ best interests,” James and Hochul said. “New York’s gambling laws are designed to protect consumers, whether they are placing bets in a prediction market or a casino. When gambling platforms, including prediction markets, violate our laws, we will not hesitate to hold them accountable. We look forward to continuing to defend our laws in court.”