38 Attorneys General vs. the CFTC: Friday's Prediction Market Jurisdiction War Explained

On Friday, April 24, 2026, two opposing legal forces moved simultaneously in the fight over who controls prediction markets in America — and the same politician appeared on both sides of the battle.

By the end of that single afternoon, 38 state attorneys general had filed a legal brief at the Massachusetts Supreme Judicial Court urging a state court to hold firm against Kalshi — and the U.S. Commodity Futures Trading Commission had sued New York to stop that same enforcement approach cold.

The jurisdiction war over prediction markets has been building for over a year. Friday was its most dramatic single day.

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What the CFTC Filed: Suing New York in Federal Court

The CFTC filed a complaint on April 24 in the U.S. District Court for the Southern District of New York — Manhattan federal court — seeking a declaratory judgment that federal law grants it exclusive authority to regulate event contracts, and a permanent injunction preventing New York from enforcing what it characterized as preempted state gambling laws against CFTC-registered exchanges.

The target of the CFTC's suit isn't a prediction market company. It's the State of New York itself.

New York had moved against the prediction market industry three days earlier, on April 21, when Attorney General Letitia James sued Coinbase Financial Markets and Gemini Titan, alleging they were operating prediction markets in New York without the required New York State Gaming Commission license. James called the platforms' event contracts "quintessentially gambling" and objected that Coinbase and Gemini had allowed users aged 18 to 20 to participate — despite a New York state law requiring a minimum age of 21 for mobile sports betting.

The CFTC's response was swift and direct. In its complaint, the agency argued that New York's action "intrudes on the exclusive federal scheme Congress designed" to oversee commodity derivatives markets, including prediction markets.

"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 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."

New York is the fourth state the CFTC has sued directly in its escalating campaign to defend federal jurisdiction. The agency filed nearly identical lawsuits against Arizona, Connecticut, and Illinois on April 2. In Arizona, the CFTC went further — it obtained a temporary restraining order on April 10 from U.S. District Judge Michael Liburdi, blocking Arizona from enforcing its gambling laws in criminal or civil actions against CFTC-regulated designated contract markets.

In a joint statement following the CFTC's filing, James and New York Governor Kathy Hochul pushed back directly: "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."

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What 38 AGs Filed: The Massachusetts SJC Amicus Brief

Hours before the CFTC sued New York, the same Letitia James was signing onto a legal brief at the Massachusetts Supreme Judicial Court on the opposite side of the same debate.

The case at the SJC — Commonwealth of Massachusetts v. KalshiEx LLC, No. SJC-13906 — began in September 2025, when Massachusetts sued Kalshi for offering sports betting without a Massachusetts Gaming Commission license. In January 2026, a lower court issued a preliminary injunction barring Kalshi from allowing Massachusetts residents to bet on sports while the case was pending, unless the company obtained a state license.

The case is now before the SJC, Massachusetts' highest court, which accepted it for direct review. Oral arguments are scheduled for May.

On Friday, James joined a bipartisan coalition of 37 other state attorneys general and the District of Columbia in filing an amicus brief urging the SJC to uphold the preliminary injunction. The coalition spans states from every region of the country and both political parties.

"Prediction markets cannot ignore states' gambling laws that are designed to protect consumers," James said in a statement. "Kalshi's event contracts for sports are just illegal gambling by another name, and they should play by the same rules as every other licensed gambling platform."

The 38 AGs filing the brief are: New York, Alabama, Alaska, Arizona, Arkansas, California, Colorado, Connecticut, Delaware, Hawai'i, Idaho, Illinois, Iowa, Kansas, Louisiana, Maine, Maryland, Michigan, Minnesota, Mississippi, Nebraska, Nevada, New Jersey, New Mexico, North Carolina, Ohio, Oklahoma, Oregon, Pennsylvania, Rhode Island, South Carolina, South Dakota, Tennessee, Utah, Vermont, Virginia, Wisconsin, and the District of Columbia.

Their legal argument centers on Dodd-Frank. Kalshi has argued that the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 — which gave the CFTC authority to regulate swaps — preempts state gambling laws and effectively legalizes its event contracts nationwide. The AGs reject that reading directly.

"The Dodd-Frank Act was intended to rein in the financial instruments that caused the 2008 recession, not permit sports gambling nationwide," the coalition argued. Crucially: when Dodd-Frank was enacted in 2010, federal law still barred states from legalizing sports gambling under the Professional and Amateur Sports Protection Act — which means Congress couldn't have intended to legalize sports betting through a swap-regulation statute. "If Congress meant to overturn the long tradition of state regulation over gambling that dates to the founding of the country, it needed to have said so clearly."

The same day the AGs filed their brief, the CFTC also filed its own counter-brief in the Massachusetts SJC case, reaffirming its position that the Commodity Exchange Act gives it exclusive jurisdiction over these markets.

"Some states continue to pursue ever-escalating, illegal enforcement actions against CFTC-regulated exchanges, despite rulings from multiple courts halting those efforts," Chairman Selig said. "Congress has entrusted the CFTC with the sole authority to regulate commodity derivatives markets, including prediction markets. To any state that seeks to nullify federal law and seize authority over these markets, I say again: we will see you in court."

The SJC is now facing briefs from two directly opposing federal forces: 38 state AGs and the CFTC itself, both in the same docket.

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The Letitia James Paradox: On Both Sides in One Day

The most striking aspect of Friday's filings is who appears on both of them.

New York Attorney General Letitia James spent April 24, 2026 simultaneously:

• Signing an amicus brief urging the Massachusetts SJC to uphold state regulation of Kalshi, arguing states have authority over gambling
• Being named a defendant in the CFTC's federal lawsuit over New York's enforcement of those same state gambling laws

James sued Coinbase and Gemini on April 21 under state law — and by Friday, the CFTC had named her, Governor Hochul, the New York State Gaming Commission, and Gaming Commission Executive Director Robert Williams as defendants in SDNY.

This is not a theoretical contradiction. James is actively defending state police power over gambling while being sued by a federal agency for exercising exactly that power. She is simultaneously trying to take down prediction markets in New York and trying to preserve state authority to do so in Massachusetts.

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The Coalition: Who's In and What It Means

The breadth of the 38-AG coalition is worth examining because it's not what a simple partisan breakdown might suggest.

The coalition includes states where courts have already sided with Kalshi — including New Jersey, where the U.S. Court of Appeals for the Third Circuit ruled 2-1 on April 6 that the CFTC has exclusive jurisdiction over Kalshi's sports-related event contracts. Despite that loss in court, New Jersey's AG still signed the brief.

It includes Tennessee, where a federal district judge issued a preliminary injunction in February 2026 favorable to Kalshi. Tennessee still signed.

And it includes Arizona, Connecticut, and Illinois — all three states currently being sued by the CFTC in federal court. They're also amicus signatories supporting the state-regulation position at the SJC.

The spread — from California to Kansas to Rhode Island to Mississippi — signals that the AG coalition views this not as a partisan or regional fight, but as a fundamental federalism question: Can Congress silence decades of state authority over gambling through a statute that never mentions gambling at all?

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The Legal Architecture: What Preemption Actually Means

Both sides are fighting over a doctrine called federal preemption — the principle that when federal law conflicts with state law, federal law wins under the Supremacy Clause of the Constitution.

The CFTC's argument: The Commodity Exchange Act explicitly grants the agency "exclusive jurisdiction" over commodity futures, options, and swaps traded on federally regulated exchanges. Kalshi is a CFTC-designated contract market (DCM). Under the CEA, states cannot separately regulate what a DCM is already regulated to do.

The states' argument: The CEA's swap-preemption provisions were written in 2010 to address credit default swaps and other instruments that contributed to the 2008 financial crisis. Congress was not writing a sports betting law. And under long-standing federalism principles, Congress must be crystal-clear when it intends to override traditional state authority — particularly over gambling, which states have regulated since the country's founding.

The current scorecard is mixed. The Third Circuit sided with Kalshi; the Ninth Circuit heard arguments on April 16 and has not yet ruled; district courts in Nevada, Maryland, Ohio, and Massachusetts have ruled for the state-regulation position. The CFTC's Arizona TRO is in place, but CFTC's cases against CT, IL, and NY are still at the complaint stage.

Multiple legal analysts expect this dispute to reach the U.S. Supreme Court. The first step toward that outcome is an inter-circuit split — which already exists between the Third Circuit (for federal preemption) and the various district courts that have ruled for states.

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What Happens Next

April 28, 2026 (Monday–Tuesday): Van Dyke SDNY arraignment for the first-ever prediction market insider trading case; Polymarket's V2 exchange cutover. Both events keep prediction markets in the news cycle as the jurisdiction war plays out.

April 30, 2026 (Thursday): The CFTC's comment period closes for its Advance Notice of Proposed Rulemaking (ANPRM) on event contracts. Comments from the public and industry will inform whether the agency pursues a new regulatory framework — or relies entirely on its litigation posture.

May 2026: Massachusetts SJC oral arguments in Commonwealth v. KalshiEx LLC, No. SJC-13906. This is the most immediately consequential forum, with both 38 state AGs and the CFTC in the same docket arguing opposite positions. A ruling against Kalshi at Massachusetts' highest court would create more circuit friction; a ruling for Kalshi would validate the CFTC's preemption theory in a state where prediction markets are currently blocked.

The SDNY runway: The CFTC's suits against Arizona, Connecticut, Illinois, and New York are all active in federal district court. The New York case has the clearest fact pattern — the CFTC is responding directly to a named AG's enforcement actions that were publicly announced three days prior.

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Frequently Asked Questions

Does Friday's news affect whether I can use prediction markets in my state? No immediate change for users. Platforms remain fully operational in states where they have not been separately enjoined (Kalshi is blocked in Massachusetts only, pending that litigation). The legal battles are over who has the right to regulate — courts have generally not issued blanket national bans on prediction markets.

What is the Massachusetts case about, specifically? Massachusetts sued Kalshi in September 2025 for offering sports event contracts without a state gaming license. A lower court issued a preliminary injunction in January 2026. The case is now at the Massachusetts Supreme Judicial Court — the state's highest court — with oral arguments expected in May. The CFTC has filed its own brief in that case supporting Kalshi's federal preemption argument; 38 AGs have filed a competing brief supporting Massachusetts.

What does it mean for states to sign an amicus brief? An amicus brief ("friend of the court" brief) allows non-parties to submit legal arguments to a court. The 38 AGs are not direct parties to the Massachusetts case, but they're telling the SJC that their states have a stake in the outcome — specifically that federal preemption of state gambling authority would affect every state's ability to regulate gambling.

What is the CFTC's core legal argument? The Commodity Exchange Act explicitly grants the CFTC "exclusive jurisdiction" over futures and swaps traded on federally designated exchanges. Kalshi is a CFTC-designated contract market. The CFTC argues that state laws purporting to regulate or ban these contracts are therefore preempted by federal law under the Supremacy Clause.

Where does this end up? Legal analysts widely expect this to reach the U.S. Supreme Court, likely by 2027 or 2028. The existing circuit conflict — Third Circuit favoring federal preemption, multiple district courts favoring state authority — is exactly the kind of split that the Supreme Court typically grants certiorari to resolve.

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Sources & Verification

• CFTC v. New York, SDNY (filed April 24, 2026): CFTC Press Release 9218-26 — chairman quote, relief sought, case context
• CFTC amicus brief in Mass SJC (filed April 24, 2026): CFTC Press Release 9219-26 — case number (SJC-13906), chairman quote
• 38-AG amicus brief in Mass SJC: NY AG Press Release, April 24, 2026 — full coalition list, James quote, Massachusetts case background, Dodd-Frank argument
• CFTC v. NY / James-Hochul joint statement: Reuters, Jonathan Stempel, April 24, 2026 — joint statement text, defendants named, NY Gaming Commission min-age complaint
• CFTC TRO in Arizona: CFTC Press Release 9211-26 — April 10, 2026, U.S. District Judge Michael Liburdi
• Third Circuit ruling (KalshiEX v. Flaherty, NJ): 2-1 ruling, April 6, 2026 — verified in predictionmarkets.us platform fact registry