A coalition of 37 state attorneys general has lined up behind New York Attorney General Letitia James in opposition to the Commodity Futures Trading Commission's attempt to claim sole authority over prediction markets. The bloc, announced in a post from Coin Bureau on April 25, argues that event contracts on sports and elections fall under state gambling law, not federal commodities oversight.
The escalation lands days after the CFTC sued New York to block state action against Coinbase and Gemini, which both list event contracts through Kalshi-routed infrastructure. Until now the fight had been one state at a time. The 37-AG coalition turns it into a coordinated multistate counterattack.
Why The States Are Pushing Back
State attorneys general have long claimed that any contract paying out on the result of a sporting event, an election, or a celebrity vote is gambling, and gambling sits with state regulators. Several states have already sent cease-and-desist letters to Kalshi and other platforms, and a handful have filed suit.
The CFTC's argument is the inverse: event contracts are derivatives, derivatives are federal, and any state law in the way is preempted by the Commodity Exchange Act. The agency's recent posture, including the New York lawsuit and earlier filings against Arizona, Illinois, and Connecticut, treats preemption as settled.
The 37-state coalition is a direct response to that posture. By joining James publicly, the AGs are signaling that they intend to defend state gambling laws as a unified front in court rather than let the CFTC pick them off jurisdiction by jurisdiction.
What Sits Behind The Numbers
Prediction markets have moved from a niche product to a multi-billion-dollar segment in less than two years. Kalshi and Polymarket together processed billions of dollars in volume during the 2024 election cycle, and Coinbase, Gemini, and Robinhood have all listed CFTC-cleared event contracts since.
For state AGs, the issue is not academic. Sports betting alone generates billions in state tax revenue across the 38 jurisdictions where it is legal. If federal preemption strips states of authority over sports event contracts, those revenue streams and the consumer protections attached to licensed sportsbooks become harder to defend. James's coalition frames the issue exactly that way: as a fight to preserve state-level gambling oversight.
The CFTC's preemption argument also runs into a structural problem. Federal courts have ruled both ways on similar questions in the past year. A federal judge in Nevada blocked Arizona's criminal case against Kalshi on preemption grounds. The Third Circuit is weighing a parallel New Jersey case. The legal map is unsettled, and the AG coalition is betting that a coordinated defense gives state law its best shot.
Implications For Crypto Platforms
Coinbase and Gemini are caught in the middle. Both list event contracts that route through Kalshi's CFTC-registered exchange. A win for the CFTC clears them to keep operating those products in every state. A win for the AGs forces them to either geofence event contracts out of opposing states or pull the products entirely.
For users, the practical concern is simpler: which states will still let you trade sports event contracts on a regulated exchange six months from now? If the coalition holds and prevails in even a handful of major jurisdictions, the product map will look very different.
Crypto card issuers and on-ramp providers tied to these platforms have a smaller, but still real, exposure. Volume from prediction markets has been a meaningful share of certain platform revenues this year, and any forced retreat from large states like New York, California, or Texas would show up in the next quarterly numbers.
What Happens Next
The most likely near-term path is consolidated litigation. With 37 AGs aligned, the courts may merge the various federal-state disputes into a single test case rather than hear them piecemeal. That would push the question toward the appellate level faster.
Congress is the other variable. The CLARITY Act markup slipped into mid-May, and several House drafts contain language that would either entrench or carve back federal preemption over event contracts. Lobbying on both sides has already shifted to those provisions.
For now the standoff is exactly that: a federal agency claiming exclusive authority, and 38 state law enforcers, including James, saying it does not. The next ruling, in any of the pending cases, will tell the market which way the wind is blowing.
Overview
A 37-state attorney general coalition led by New York's Letitia James has formed in opposition to the CFTC's push to claim exclusive authority over prediction markets. The move escalates a fight that began with one-off state actions and now becomes a coordinated multistate defense of state gambling law. Coinbase, Gemini, and Kalshi sit in the middle of the dispute, and the outcome will reshape where US users can legally trade event contracts.
