Manhattan judge weighs CFTC bid to block New York prediction market crackdown
Judge Lorna G. Schofield heard arguments in Manhattan federal court on the CFTC's bid to block New York from enforcing gambling laws against sports-event contracts. The CFTC and a prediction market operator sought the injunction. The American Gaming Association urged the court to reject the CFTC's request, arguing for state tax and consumer-protection authority. Schofield questioned both sides over conflicting appellate rulings but did not immediately rule.
The hearing puts the CFTC's preemption theory on trial in a state that generates outsized trading volume. Kalshi and Polymarket need a federal shield here; a loss would force them to geofence New York or face gambling enforcement. The American Gaming Association's opposition signals that the sports betting industry will fight every inch. Judge Schofield's eventual ruling will echo in Connecticut and Baltimore, where parallel state suits are already active.
The conflicting appellate rulings she flagged suggest the Second Circuit may not give platforms the clean answer they want. Each state court that rejects CFTC preemption shrinks the national market for sports-linked contracts and pushes traders toward fragmented liquidity pools. A Supreme Court grant on the pending cert petition would unify the rules, but the timeline is uncertain and platforms must survive interim losses.
Crypto.com and Robinhood's Supreme Court petition to settle the preemption question now shares federal docket space with the CFTC's separate bid to block New York enforcement, giving the industry two parallel federal paths out of the state-by-state litigation spiral that has already cost Kalshi its Nevada shield and spawned Connecticut and Baltimore suits.