The Trump administration on Friday filed a motion for a preliminary injunction in federal court to block New York Attorney General (AG) Letitia “Tish” James from enforcing state gambling laws against prediction market platforms.
The filing from the Commodity Futures Trading Commission (CFTC) came the same day James filed to bring her own cases back to state court—and both motions landed before the same judge, the Honorable Victor Marrero of the United States District Court for the Southern District of New York.
The dueling filings are the latest escalation in a national legal battle that has been intensifying for months, as the Trump administration encourages the growth of prediction market platforms and more than a dozen states push back.
Prediction markets allow users to buy contracts tied to the outcome of future events, from elections to sporting events to weather. Critics say the platforms are gambling by another name, operating without the age limits, licensing requirements, and consumer protections that govern traditional gambling. Supporters argue they are fundamentally different from gambling because the probability of a given outcome is expressed as a price and traded among users, making the markets accurate predictors of real-world events.
New York is the latest state to enter the fight. James filed lawsuits on April 21 against Coinbase and Gemini, cryptocurrency companies that have become two of the largest players in the prediction market space, accusing both companies of operating illegal, unlicensed gambling platforms in New York. The suits allege the companies allowed New Yorkers as young as 18 to bet on sporting events, elections, and entertainment without a license from the New York State Gaming Commission.
New York law sets the minimum age for mobile sports betting at 21 and requires licensed operators to pay a 51% tax on gross revenues, funding public schools, youth sports programs, and problem gambling treatment. Licensed platforms must also include addiction warnings in all advertisements and provide self-exclusion tools. Neither company obtained the required license or implemented the age restrictions mandated by state law.
James is seeking forfeiture of illegal profits, consumer restitution, and fines totaling three times the companies’ earnings.
“Gambling by another name is still gambling, and it is not exempt from regulation under our state laws and Constitution,” James said in a statement. “Gemini and Coinbase’s so-called prediction markets are just illegal gambling operations, exposing young people to addictive platforms that lack the necessary guardrails.”
The human cost
The rapid expansion of prediction markets has alarmed public health researchers. A peer-reviewed study published in Science warns that commercial prediction markets combine gambling-like design with crypto-based infrastructure optimized for engagement, creating risks of behavioral addiction and democratic manipulation.
Research also shows that credit scores, particularly among young men, drop dramatically when sports betting is legalized, a pattern that experts warn could repeat itself as prediction markets grow.
Clinicians who treat gambling disorders say they are already seeing the consequences: patients who had legally self-excluded from sports betting platforms have relapsed on Kalshi and Polymarket, describing the experience as indistinguishable from gambling.
Legal battle escalates
On April 24, just three days after James filed her lawsuits against Gemini and Coinbase, the CFTC sued New York State, arguing that federal law gives it exclusive jurisdiction over prediction market platforms and that the state’s enforcement actions are unconstitutional. CFTC Chairman Michael Selig made the Trump administration’s position plain.
“The CFTC will not allow overzealous state governments to undermine the agency’s longstanding authority over these markets,” he said in a statement.
Then on May 1, the CFTC escalated further, filing a motion for a preliminary injunction—a request for the court to immediately halt New York’s enforcement while the broader legal fight plays out. That same morning, James filed her own motion in a separate but related case, seeking to remand the Gemini lawsuit back to New York State Supreme Court, where it was originally filed. Gemini had moved to transfer the case to federal court after James’ original filing.
The AG’s office is requesting oral argument on the motion.
James and Gov. Kathy Hochul issued a joint statement pushing back on the federal intervention.
“Once again, this administration is prioritizing big corporations over consumers and New Yorkers’ best interests,” the two Democrats said.
Bradley Lipton, a financial regulation expert at the Roosevelt Institute, a progressive think tank focused on economic policy, called the CFTC’s actions extraordinary.
“I can’t think of an example where the federal government has been that aggressive to actually go to court over this stuff,” he said.
He compared the administration’s posture to Bush-era banking regulators who preempted state consumer protections in the years before 2008.
“And that’s how we got the mortgage crisis.”
Coinbase and Gemini have argued their platforms are federally regulated financial exchanges, not gambling operations, and that the CFTC holds jurisdiction. Paul Grewal, Coinbase’s chief legal officer, wrote on social media that the company would continue fighting for the federal oversight of prediction markets that it argues Congress intended.
Neither Coinbase nor Gemini responded to Courier New York’s requests for comment.
Lipton pushed back on that argument. Prediction market companies are claiming their products are “swaps” covered exclusively by the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010—landmark legislation passed in response to the 2008 financial crisis—a “really quite a novel position,” he said, given that states have regulated gambling since the country’s founding. The idea that Congress, in passing Dodd-Frank, intended to hand the gambling industry to federal regulators is, Lipton said, “just beyond the pale.”
The New York Times has reported that members of the Trump administration and their associates hold financial interests in prediction market platforms, raising concerns among government ethics watchdogs and Democratic lawmakers about conflicts of interest. Policymakers who have a financial stake in an outcome, critics argue, are distorted away from acting on the merits.
Lipton echoed that concern. “This is really about billionaires trying to get rich by avoiding state laws,” he said.
Unlike licensed platforms, he noted, prediction markets operate without clear rules around insider trading or consumer protections. In its first-ever insider trading case involving prediction markets, the CFTC on Apr. 23 charged an active-duty Army soldier with using classified information about a U.S. military operation to place bets on Polymarket.
The soldier, Gannon Ken Van Dyke of North Carolina, allegedly used nonpublic knowledge of the operation that captured former Venezuelan President Nicolás Maduro to generate more than $400,000 in profits. Federal prosecutors in Manhattan filed parallel criminal charges the same day.
A broader fight
James is not fighting alone. On Apr. 24, she joined a bipartisan coalition of 37 other attorneys general in filing an amicus brief supporting Massachusetts’ lawsuit against Kalshi, urging the court to reject the company’s argument that its products are financial instruments beyond the reach of state law. New York’s gambling laws, which the brief defends, require licensed operators to prohibit betting on New York college teams, mandate responsible gaming protocols, and direct tax revenue to education and addiction services.
“Prediction markets cannot ignore states’ gambling laws that are designed to protect consumers,” James said.The CFTC has already scored one victory in the national battle; a federal judge recently barred Arizona from enforcing its gambling restrictions against Kalshi while litigation proceeds.
