CFTC Squares Up to New Mexico in Kalshi Showdown: "Our Turf, Our Rules" 🏛️

The U.S. Commodity Futures Trading Commission has filed a federal lawsuit against New Mexico, escalating a legal fight over the state's effort to regulate sports prediction contracts offered by Kalshi. The complaint, lodged in federal court Friday, argues that New Mexico is attempting to enforce state gambling laws against CFTC-registered derivatives exchanges, and seeks a declaration of exclusive federal jurisdiction over event contracts under the Commodity Exchange Act, along with an injunction blocking the state from acting against CFTC-regulated platforms.

The suit follows a state-court action filed last week by New Mexico Attorney General Raúl Torrez, who alleged that Kalshi has been operating illegal sports betting markets online and attempting to "evade state gaming laws." The state is asking the courts to bar Kalshi from offering sports event contracts to New Mexico residents.

CFTC chairman Michael S. Selig said, "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 added that the regulator "has the expertise" to oversee the sector.

New Mexico is not the only state to push back against prediction markets. Arizona, Connecticut, Minnesota, Illinois, and Wisconsin have begun regulatory enforcement or legislative action against such platforms, while the North American Derivatives Exchange (Nadex) has sued New York to prevent state enforcement against its sports event contracts. Former SEC and CFTC chair Gary Gensler filed an amicus brief in the Ohio case involving Kalshi, arguing that the CFTC was not granted authority over sports betting prediction markets, stating, "If Dodd-Frank had preempted the states on sports betting, it would have been one of the biggest stories about Dodd-Frank at the time. But nobody ever mentioned it." Kalshi communications officer Jacki McGavick called the argument "wrong," adding, "This is the same person who insisted crypto was a security for years, and lost in court several times. It's not surprising he's wrong about what qualifies as a swap under the Commodity Exchange Act."

The dispute comes as the FIFA World Cup drives heightened activity in sports-related prediction markets, placing the broader jurisdictional question squarely in the public view. The CFTC has said it intends to continue defending what it describes as its exclusive authority over commodity derivatives, including event contracts, as the legal fight expands across multiple states.