The Commodity Futures Trading Commission (CFTC) has initiated a lawsuit against the state of New Mexico, intensifying an ongoing dispute regarding the oversight of prediction market platforms and event contracts linked to sports results.
This legal action, lodged on June 12 in the US District Court for the District of New Mexico, aims to prevent state officials from enforcing New Mexico’s gaming regulations on operators of prediction markets that are registered with the CFTC. Among the defendants named in the complaint are Governor Michelle Lujan Grisham, Attorney General Raúl Torrez, and members of the New Mexico Gaming Control Board.
The CFTC is seeking a declaratory judgment that affirms its jurisdiction over event contracts traded on federally regulated platforms, as well as a permanent injunction to stop the state from applying its gaming laws to these operators. The complaint specifically mentions KalshiEX.
According to the CFTC's filing, “The CFTC possesses clear and long-established exclusive authority to regulate event contracts and the prediction markets where they are traded under the Commodity Exchange Act, which supersedes state laws that attempt to regulate designated contract markets.”
This federal lawsuit follows New Mexico's legal actions against prediction market operator Kalshi on June 4.
In its lawsuit, New Mexico claims that Kalshi has been providing online sports betting services to residents without the necessary licenses mandated by state law. The state argues that Kalshi's event contracts enable users to bet on the outcomes of sports events similarly to traditional sports betting, while circumventing the state's regulatory framework.
Moreover, New Mexico alleges that Kalshi allowed individuals aged 18 to 20 to participate, despite the state requiring a minimum age of 21 for gaming.
In response, the CFTC contends that federal law grants it exclusive authority to oversee event contracts and prediction markets operating as designated contract markets under the Commodity Exchange Act, thereby overriding state-level gaming regulations.
This case in New Mexico marks the latest clash between state regulators and the CFTC concerning prediction market platforms. The CFTC notes that New Mexico is the eighth state to challenge the regulatory status of these markets, following similar actions in Arizona, Connecticut, Illinois, New York, Minnesota, Rhode Island, and Wisconsin.
CFTC Chairman Michael S. Selig criticized New Mexico's legal stance, asserting: “New Mexico is the latest state attempting to invalidate established law and decades of judicial precedent by enforcing state gaming regulations on federally regulated derivatives exchanges that fall under the CFTC’s exclusive jurisdiction. As I have consistently stated, the CFTC has the expertise and obligation to safeguard its exclusive jurisdiction over commodity derivatives, and that is precisely what we will continue to uphold.”