Federal Government Sues NY to Stop Enforcing Gambling Laws on Event Contracts

The United States and the CFTC sued New York State to block it from applying state gambling laws to event contracts traded on CFTC-regulated exchanges.

In the case, filed in the U.S. District Court for the Southern District of New York, the federal government argued that the CEA grants the CFTC exclusive jurisdiction over event contract swaps traded on designated contract markets ("DCMs") thereby preempting New York law under the Supremacy Clause. The government further contended that state licensing requirements make it impossible for DCMs to comply with the federal mandate to provide impartial market access to all participants nationwide. The government emphasized that the Third Circuit Court of Appeals reached the same conclusion in KalshiEX, LLC v. Flaherty.

In prior actions, the NY Attorney General filed civil enforcement actions against Coinbase Financial Markets, Inc. and Gemini Titan, LLC alleging both operated illegal gambling platforms in violation of New York law. In addition, the New York State Gaming Commission previously issued a cease-and-desist order to KalshiEX, LLC (“Kalshi”) on October 24, 2025 on the same grounds. All three defendants in these cases are CFTC-DCMs or are registered Futures Commission Merchants. As asserted in the federal Complaint, the Attorney General of New York has "made clear that they believe event contracts, including sports related event contracts listed on CFTC-regulated markets, are wagers, rather than swaps, and so may be offered only by firms that have obtained a license from the New York State Gaming Commission."

The federal government requests:

• a declaration that New York’s gambling and wagering laws are preempted as applied to CFTC-regulated DCMs;
• a permanent injunction barring New York officials from enforcing those laws against CFTC-regulated markets; and
• costs and fees.