CFTC Sues New Mexico Over Prediction Market Regulations

The Commodity Futures Trading Commission is suing New Mexico over who regulates prediction markets in the state. The federal agency argues that federally regulated prediction markets fall under its exclusive authority and cannot be governed as gambling by state authorities. The lawsuit follows New Mexico’s legal action against Kalshi, which the state contends is illegally offering online sports betting. Indeed, this marks the eighth state the CFTC has taken legal action against to protect its prediction market jurisdiction. The agency has previously sued authorities in Rhode Island, Minnesota, Wisconsin, New York, Arizona, Connecticut, and Illinois over their attempts to regulate the exchanges.

CFTC Files Lawsuit Against New Mexico Over Kalshi Operations

CFTC Chairman Michael Selig stated that New Mexico seeks to nullify established legal precedent by imposing state gaming laws on federally regulated derivatives exchanges subject to the CFTC’s exclusive jurisdiction. The federal agency responded after Attorney General Raúl Torrez filed a lawsuit against Kalshi last week, claiming the prediction market operator illegally offers online sports betting in the state through trading of sports event contracts.

Torrez alleges that Kalshi created an online platform functioning as a sportsbook, allowing users to place wagers on sporting events while operating outside New Mexico’s licensing and regulatory requirements. The complaint states Kalshi has offered these products to New Mexico residents without obtaining any gaming license from the state. Besides the licensing violations, the lawsuit claims Kalshi allowed participation by individuals between ages 18 and 20, notwithstanding New Mexico’s minimum gaming age of 21.

The CFTC lawsuit notes that several federal courts have swiftly responded by issuing temporary restraining orders and preliminary injunctions barring states from enforcing gambling laws against CFTC-regulated exchanges offering sports-related event contracts. Correspondingly, the agency released proposed prediction market rules this week showing support for most sports-related event contracts.

New Mexico maintains a carefully balanced system for regulating gaming that protects consumers, ensures accountability, and respects tribal sovereignty. The state’s gaming framework reflects decades of collaboration among state leaders, regulators, gaming operators, and tribal governments through tribal-state gaming compacts negotiated with sovereign tribal nations.

Federal Agency Sues Eight States in Expanding Jurisdictional Battle

Rhode Island became the seventh state targeted by the CFTC when the agency moved to intervene in a lawsuit filed by the state against Kalshi and Polymarket. Attorney General Peter Neronha sued both platforms, arguing they violated state sports-betting laws through sports-related event contracts. The CFTC responded by seeking to intervene in the existing lawsuit and filing its own complaint against Rhode Island.

The agency filed lawsuits on April 2 against Arizona, Connecticut, and Illinois, challenging their actions against CFTC-registered designated contract markets. Following Arizona’s escalation to criminal proceedings, the U.S. District Court for the District of Arizona granted a temporary restraining order on April 10, blocking the state from pursuing criminal charges. Chairman Selig described Arizona’s decision to weaponize state criminal law against companies complying with federal law as setting a dangerous precedent.

Minnesota became the agency’s sixth target when Governor Tim Walz signed legislation banning prediction markets from operating in the state. The CFTC subsequently sued Wisconsin and New York after those states’ attorneys general filed gambling-law actions against registered exchanges.

Eighteen states are currently engaged in litigation over prediction markets. Whereas some courts sided with states, the U.S. Court of Appeals for the Third Circuit ruled that New Jersey cannot enforce gambling laws on prediction markets.

What New Mexico’s Stance Means for Future of Online Sports Wagering

Classification of prediction markets as federally regulated derivatives rather than gambling strips states of authority to tax that activity under their gaming frameworks. As a result, New Mexico faces potential losses from its carefully structured tribal gaming system.

Several Native American tribes in New Mexico operate sports betting under tribal governance through Class III gaming compacts. The state’s current compact dates to 2015 and remains in effect through June 30, 2037, with all 14 tribes operating casinos as signatories. In 2025, New Mexico tribal casinos generated USD 900.20 million in casino gaming revenue, up 5.2 percent versus the prior year.

While tribal casinos offer sports betting in addition to electronic gaming devices and table games, the gaming industry contends prediction market platforms offer illegal sports betting nationwide outside state and tribal regulatory frameworks. These platforms override voter decisions, bypass consumer protections, ignore state and tribal laws, and avoid licensing and taxes.

Legal operators must comply with know-your-customer protocols, anti-money laundering safeguards, integrity monitoring requirements, responsible gaming requirements, age verification, and local gaming requirements. Prediction markets operate without these safeguards. The tribal gaming compact states that if internet gaming authorization occurs, the state and signatory tribes agree to reopen negotiations to evaluate internet gaming’s impact and consider compact adjustments.