USA – NEW YORK Trends and Developments Contributed by: Mitchell Schuster and Richard T. Lobas, Meister Seelig & Schuster
and Breeding Law, commonly known as the “Rac - ing Laws”. Conducting, advertising and promoting unlicensed sports wagering in New York is a viola - tion of §§ 1367 (2) and 1367-a of the Racing Laws. The New York Gaming Commission has jurisdiction over all sports wagering activities in New York State, along with the corporations, individuals and associa - tions involved. On 2 February 2026, New York Attorney General Letitia James took aim at prediction markets offer - ing sports-based event contracts. Attorney General James crystalised her office’s position on the issue in no uncertain terms, characterising prediction markets as offering “bets masquerading as ‘event contracts’”. In addition to consumers, the alert puts the industry on notice through warning that “the conduct, adver - tisement, and promotion of unlicensed sports wager - ing violate New York’s gambling laws and could be subject to civil and criminal liability”. In conjunction with emphasising the Attorney Gen - eral’s power to prosecute entities operating sports wagering businesses in New York without the requi - site licensure, in no uncertain terms, Attorney General James characterises sports-based event contracts offered through unlicensed prediction markets as a violation of New York’s Racing Laws. The alert outright states that “[t]he unlicensed offering and promotion of sports-related event contracts constitutes gambling within the meaning of New York Penal Law § 225.00 (2)”. The CFTC position In stark contrast to New York Attorney General James, the federal regulatory position on the issue has shifted to align more closely with prediction market operators’ arguments. On 29 January 2026, US CFTC chairper - son Michael Selig announced the withdrawal of a 2025 “staff advisory” that specifically cautioned registrants about offering access to sports-related event con - tracts due to ongoing litigation, and a 2024 proposed rule that would ban political and sports-related event contracts. Those withdrawals became effective on 4 February 2026. In his 29 January remarks, chairperson Selig lauded the history of the CFTC and traced the industry development from early “bucket shops” in
the late nineteenth century through the Commodity Futures Modernization Act upon the advent of elec - tronic trading platforms. According to chairperson Selig, prediction markets are among the latest innova - tions making up the “foundation of modern markets”. Additionally, chairperson Selig seemingly attempted to plant the federal flag in the prediction market regu - latory landscape, directing CFTC staff to “reassess the Commission’s participation in matters currently pending before the federal district and circuit courts. Where jurisdictional questions are at issue, the Com - mission has the expertise and responsibility to defend its exclusive jurisdiction over commodity derivatives”. Of course, chairperson Selig’s declaration is at odds with state attorneys general, like Letitia James, who seek to regulate sports-based event contracts under state sports wagering regulatory frameworks. Notable cases While Attorney General James’ position is clear, the future landscape of these exchanges is anything but “predictable”. Generally, the argument against state regulation of prediction markets offering sports-based event contracts is that these platforms, including Polymarket and Kalshi, operate a “contract market” subject to the exclusive jurisdiction of the Commodity Exchange Act and CFTC. Thus, the argument goes, any state legislature’s attempt to regulate them is pre- empted by federal law. New York is at the centre of this issue, with several notable cases pending in its federal courts. For instance, Kalshi has taken the offensive against state regulation. In the case KalshiEX LLC v Williams (case number 1:25-cv-08846), pending in the United States District Court for the Southern District of New York, Kalshi sued the New York State Gaming Com - mission (NYSGC) and individuals associated with the NYSGC, seeking a permanent injunction and declara - tory relief. The suit followed a cease and desist letter from the NYSGC to Kalshi dated 24 October 2025. In the lawsuit, Kalshi seeks a judgment declaring that any New York law, including Racing Law Sections 104 and 1367, along with Penal Law 225.00 (2), to the extent they are used to regulate Kalshi’s prediction markets, violate the Supremacy Clause of the United
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