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Federal judge to decide if federal regulators control prediction markets

A New York judge heard arguments on whether federal regulators or state laws control sports prediction markets.

Written by the BettingEdgeHub desk, 16 September 2026

Federal courts are currently weighing a major dispute over who gets to regulate prediction markets. The Commodity Futures Trading Commission argues that federal law gives it total control over these platforms. State officials in New York disagree and want the power to enforce local rules.

The core legal battle

The conflict started when New York authorities sued major crypto platforms over their prediction markets. State lawyers claim these platforms run illegal gambling operations without proper local licenses. They want billions in penalties and restitution from the companies involved.

The federal regulator stepped in with a motion to stop the state lawsuits. Its lawyers argue that Congress designed the Commodity Exchange Act to give federal agencies exclusive power over swaps and futures markets. They claim state laws cannot interfere with federally approved exchanges.

Sports betting overlap

A major part of the argument focuses on whether prediction contracts are financial derivatives or simple sports bets. State attorneys argue that contracts on sports outcomes are classic wagers. They believe these markets belong under the control of state gaming commissions rather than financial regulators.

The American Gaming Association also joined the fight against the federal agency. The trade group argues that sports event contracts are standard sports bets rather than novel financial instruments. They claim these platforms operate as unregulated sportsbooks.

The federal judge presiding over the case did not issue an immediate ruling after the hearing. Both sides are waiting for a final decision that could reshape how sports prediction markets operate across the country.