The Commodity Futures Trading Commission (CFTC) has asked the U.S. District Court for the Southern District of New York to issue a preliminary injunction against Attorney General Letitia James. It seeks to prevent her from pursuing criminal or civil enforcement actions tied to sports event contracts.
At the heart of the dispute is the regulatory oversight of prediction markets and event-based contracts. According to CFTC, these products qualify as derivatives and futures contracts. They are also under federal jurisdiction.
With the injunction underway, the agency maintains that state gambling laws should not apply to contracts intended as financial instruments. This request follows a lawsuit the CFTC filed on 25 April, claiming New York regulators exceeded their authority by targeting crypto-linked prediction market operators.
James vs. Coinbase and Gemini
On 21 April, James accused Coinbase and Gemini of running illegal gambling businesses through event-based contracts tied to elections and sports outcomes. She contends these products fall under New York gambling law and require licencing from the State Gaming Commission.
Her office is seeking a permanent injunction, restitution, disgorgement, civil penalties, and an accounting against Coinbase Financial Markets and Gemini Titan. She also requested a temporary restraining order and preliminary injunction.
Coinbase and Gemini have pointed out that they offer federally regulated financial instruments under the CFTC’s oversight and that they are not gambling products under state law. Additionally, Coinbase has emphasised its partnership with a CFTC-registered exchange, while Gemini has taken a more reserved stance but similarly positions its contracts as event-based derivatives.
This confrontation sheds light on the larger tension between federal preemption and state regulatory authority. If courts are in favour of CTFC, this could limit the state’s ability to monitor crypto-linked prediction markets. Meanwhile, a ruling in favour of James could reinforce the state’s authority to classify event contracts as gambling, reshaping how exchanges operate across the country.
Once again, this administration is prioritizing big corporations over consumers.
— NY AG James (@NewYorkStateAG) April 24, 2026
When gambling platforms, including prediction markets, violate our laws, we will hold them accountable.
My office and @GovKathyHochul will keep defending our laws in court.https://t.co/SC0XkMIZsc
Public commentary on prediction market rules
On 1 May, the CFTC closed its 45-day public comment period on proposed rules for prediction markets. Responses came from the Coalition for Prediction Markets, the NBA, and several Democratic lawmakers.
Again, a favourable outcome for the CFTC could encourage fintech innovation by clarifying that certain contracts are financial instruments. But a negative one could strengthen states, leading investors to view prediction markets as high-risk and discouraging capital inflows. Even with federal recognition, ongoing state challenges may continue to deter institutional participation.
Lawmakers and the NBA push for stricter oversight
Democratic legislators, for instance, recommend that the CFTC strengthen protections against insider trading and restrict contracts involving elections, military activity, government actions, and sports. The NBA also echoed these concerns. They call for “robust and comprehensive regulations” to safeguard the integrity of professional leagues. It specifically asked the CFTC to impose tighter restrictions on players, officials, and team staff.
Global implications
The dispute between the CFTC and New York Attorney General reverberates far beyond the U.S. According to industry analysts, the results will likely serve as a benchmark for international regulators: whether prediction markets are treated as tools for financial innovation or as high-risk gambling products.
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