New Mexico faces CFTC lawsuit over regulation of federally registered prediction markets

The Commodity Futures Trading Commission (CFTC) has filed a lawsuit against the state of New Mexico, escalating a dispute over the regulation of prediction market platforms and event contracts tied to sports outcomes.

The complaint, filed on June 12 in the US District Court for the District of New Mexico, seeks to prevent state authorities from applying New Mexico gaming laws to CFTC-registered prediction market operators. The federal regulator named Gov. Michelle Lujan Grisham, Attorney General Raúl Torrez and members of the New Mexico Gaming Control Board as defendants.

The CFTC is requesting a declaratory judgment confirming its authority over event contracts traded on federally regulated markets, along with a permanent injunction barring the state from enforcing gaming laws against those platforms. The filing specifically references KalshiEX.

According to the complaint, “The CFTC has clear and longstanding exclusive jurisdiction to regulate event contracts and the prediction markets on which they trade under the Commodity Exchange Act, which preempts state laws purporting to regulate designated contract markets.”

Dispute follows state action against Kalshi

The federal filing comes after New Mexico initiated legal action against prediction market operator Kalshi on June 4.

In its lawsuit, the state alleges that Kalshi has been offering online sports betting products to New Mexico residents without obtaining the licenses required under state law. New Mexico contends that the company’s event contracts allow users to wager on sporting event outcomes in a manner comparable to traditional sports betting while avoiding the state’s regulatory framework.

The state also alleges that Kalshi permitted participation by individuals aged 18 to 20, despite New Mexico requiring a minimum gaming age of 21.

The CFTC, however, argues that federal law grants it sole authority to regulate event contracts and prediction markets operating as designated contract markets under the Commodity Exchange Act, pre-empting state-level gaming regulation.

Growing tension between states and federal authorities

The New Mexico case represents the latest conflict between state regulators and the CFTC regarding prediction market platforms. According to the federal agency, New Mexico is the eighth state to challenge the regulatory status of such markets, following actions taken in Arizona, Connecticut, Illinois, New York, Minnesota, Rhode Island and Wisconsin.

CFTC Chairman Michael S. Selig criticized the state's legal position, stating: “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. As I’ve said repeatedly, the CFTC has the expertise and responsibility to protect its exclusive jurisdiction over commodity derivatives, and that’s exactly what we’ll continue to do.”