Trump CFTC sues New York over prediction markets regulatory overreach

The Trump administration has taken New York to court as the fight over prediction markets gets uglier, wider, and a lot more political.

The Commodity Futures Trading Commission (CFTC) filed a case Friday in Manhattan federal court, accusing the state of stepping into a market that federal law puts under Washington’s control.

The clash centers on lawsuits filed by New York Attorney General Letitia James against Coinbase (COIN) and Gemini (GEMI). Letitia says both companies ran prediction-market products that should be treated as gambling under state law. The CFTC says New York is trying to regulate contracts that belong inside the federal system for commodity derivatives.

The federal complaint says Letitia’s April 21 lawsuits cut into the national rulebook Congress created for derivatives markets, including event contracts.

The CFTC already filed similar cases on April 2 against Arizona, Connecticut, and Illinois, so the agency is clearly trying to stop states from building their own walls around prediction markets.

New York leaders defend state gambling laws as the CFTC claims federal power

Letitia and New York Governor Kathy Hochul answered the lawsuit with a joint statement that put the fight squarely on consumer protection. Both Democrats accused President Donald Trump’s Republican administration of “prioritizing big corporations” over residents and customers in New York.

They 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.”

Prediction markets let people place money on future results. Those results can include sports, elections, and other public events. The products are built around event contracts, where the payout depends on what happens later.

These markets got much more attention after the 2024 US presidential race, when their live odds were seen as more accurate than polls before Donald won. That popularity brought more users, more money, and more legal pressure.

Letitia says Coinbase and Gemini needed licenses from the New York State Gaming Commission before offering those products in the state. She also described their event contracts as “quintessentially gambling” because users cannot control the final outcome, and some results may depend on chance. 

Her office also objected to both platforms being available to people aged 18 to 20, while New York requires mobile sports-betting customers to be at least 21.

Gemini is led by billionaire twins Tyler Winklevoss and Cameron Winklevoss, with the former as CEO and the latter as president. Kalshi filed its own case against the New York Gaming Commission in October to block the state from banning event contracts before such a ban could happen, though that case is still pending.

Trump reviews federal employee betting after Polymarket case draws DOJ charges

The court fight is landing at the same time that Trump is talking about another risk in prediction markets: government workers using private information to make money. Trump said Thursday that he would review federal employees placing wagers on event-betting sites.

He was asked about federal authorities arresting a US Army soldier connected to an operation involving Venezuelan leader Nicolas Maduro, allegedly winning $400,000, as Cryptopolitan reported previously.

“I’ll look into it,” Trump told reporters. He also said he has never liked the idea of event-betting platforms.

“Well, you know, the whole world, unfortunately, has become somewhat of a casino,” Trump said. “And you look at what’s going on all over the world, in Europe and every place they’re doing these betting things. I was never much in favor of it. I don’t like it conceptually.”

Trump compared the soldier case to Pete Rose, the baseball figure who received a lifetime ban over sports betting. “Now, if he bet against his team, that would be no good, but he bet on his own team,” Trump said.

Trump has said Pete should be placed in the Baseball Hall of Fame.

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