CFTC Sues New Mexico, Making It the 8th State in Prediction Market Jurisdiction War

The Commodity Futures Trading Commission filed suit against New Mexico officials on June 12, making the Land of Enchantment the eighth state the federal regulator has hauled into court over the question of who has the authority to govern prediction market platforms. The lawsuit follows New Mexico Attorney General Raúl Torrez’s legal action against Kalshi, which claimed the prediction market company was operating as an unlicensed sports betting service inside the state.

CFTC Chairman Michael Selig stated the agency would not allow states to override the federal regulatory framework Congress designed for commodity derivatives markets. “New Mexico is the latest state seeking to nullify black letter law and decades of judicial precedent by imposing state gaming laws on federally regulated derivatives exchanges subject to the CFTC’s exclusive jurisdiction,” Selig said in a press release accompanying the filing.

What New Mexico’s Lawsuit Against Kalshi Alleged

New Mexico’s initial complaint against Kalshi, filed on June 4, argued that the company was allowing residents to bet on sports outcomes through contracts that functioned identically to traditional sports wagers — but without obtaining any state gambling license. The state also alleged Kalshi permitted users between the ages of 18 and 20 to access the platform, below New Mexico’s minimum gaming age of 21.

The attorney general framed the issue as a straightforward gambling enforcement matter. Under New Mexico’s framework, any operation that resembles sports wagering requires state authorization, and Kalshi had “ignored that framework entirely while offering online sports betting within the state,” according to the complaint.

The CFTC’s Federal Preemption Argument

The CFTC responded by filing its own federal lawsuit against Governor Michelle Lujan Grisham, Attorney General Torrez, and members of the New Mexico Gaming Control Board. The agency asked the federal court to declare that state laws targeting CFTC-registered Designated Contract Markets are invalid, and it sought a permanent injunction blocking the state from taking enforcement action against prediction market platforms.

The CFTC’s core argument is that Kalshi’s event contracts qualify as “swaps” under federal commodities law, placing them firmly within the agency’s exclusive jurisdiction. Because Kalshi holds a DCM registration granted by the CFTC, the federal government contends that states have no authority to treat its offerings as illegal gambling, regardless of how similar they may look to sports bets from a consumer perspective.

The federal agency has now sued New York, Minnesota, Rhode Island, Arizona, Connecticut, Illinois, Wisconsin, and New Mexico. Each case involves a state that has either taken enforcement action against a prediction market platform or passed legislation aimed at restricting their operations. Regulated sports betting in New Mexico has long operated through tribal compacts, and state officials argue that any additional wagering product offered to New Mexico residents must go through the same licensing process.

A Debate Reaching Federal Courts — and Beyond

The CFTC’s systematic approach to suing states suggests this battle is about establishing a legal precedent that would immunize federally registered platforms from state gambling enforcement nationwide. If the agency prevails across these cases, Kalshi and similar platforms registered with the CFTC would operate under a single uniform federal framework rather than navigating 50 different sets of state gambling laws.

A complicating factor is the public dissent from Gary Gensler, a former chair of both the CFTC and the Securities and Exchange Commission, who filed an amicus brief in a related Sixth Circuit case backing Ohio against Kalshi. Gensler argued that the 2010 Dodd-Frank Act, passed to regulate financial swaps after the 2008 financial crisis, was never intended to cover sports betting contracts. Legal observers say the conflicting positions from regulators — current and former — make a Supreme Court review increasingly likely.

For bettors, the short-term practical impact depends on which court wins out. Until a definitive ruling is issued, prediction market platforms face a patchwork of legal exposure state by state, and consumers in contested markets may find their access restricted depending on how quickly states act. The question of whether prediction markets are legal across the United States may ultimately be answered by the nation’s highest court.