CFTC Sues New Mexico as Prediction Market Jurisdiction Battle Reaches Eight States

The U.S. Commodity Futures Trading Commission sued New Mexico on June 12, targeting Governor Michelle Lujan Grisham, Attorney General Raúl Torrez, and members of the state’s Gaming Control Board in a federal complaint filed to prevent the state from applying its gambling laws to CFTC-registered prediction market platforms. The action makes New Mexico the eighth state the federal agency has taken to federal court over the same jurisdictional dispute.

The CFTC’s move came in direct response to New Mexico’s own lawsuit against Kalshi, filed on June 4, in which Attorney General Torrez alleged that Kalshi was offering residents the ability to bet on sports outcomes without obtaining a state gambling license. New Mexico’s complaint argued that Kalshi’s sports event contracts are functionally indistinguishable from traditional sports wagers and therefore require state authorization to operate.

The CFTC’s Core Legal Argument

The federal agency’s position is that Kalshi’s event contracts qualify as “swaps” under the Commodity Exchange Act — a designation that places them under the CFTC’s exclusive jurisdiction. Because Kalshi holds a Designated Contract Market license from the CFTC, the agency contends that states cannot impose their gambling laws on transactions occurring on the platform, regardless of how similar those transactions may look to traditional sports bets.

CFTC Chairman Michael Selig stated the agency has a responsibility to defend the federal regulatory framework Congress designed for commodity derivatives. “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.

The CFTC asked the federal court to declare that New Mexico laws targeting CFTC-registered exchanges are invalid and to issue a permanent injunction preventing the state from acting against prediction market operators. The agency has filed identical or similar cases in New York, Minnesota, Rhode Island, Arizona, Connecticut, Illinois, and Wisconsin.

What It Means for Sports Bettors

For sports bettors, the battle between the CFTC and individual states creates real uncertainty about where and how they can legally engage with prediction markets. Prediction markets allow users to trade on the outcomes of sports events — functioning similarly to sports bets but structured as financial contracts rather than wagers. Platforms like Kalshi have been expanding across the country under federal authorization, but state enforcement actions have created friction in markets that haven’t formally authorized them.

Sports betting legal status varies significantly by state, and prediction markets add another layer of complexity because they operate under federal commodity law rather than the state-level sports betting licensing frameworks that govern sportsbooks like DraftKings and FanDuel. New Mexico does not yet have regulated mobile sports betting through traditional sportsbooks — residents bet through tribal in-person operations or through federally authorized prediction market platforms, making the legal dispute there especially pointed.

The Gensler Wildcard

The legal landscape is further complicated by former CFTC and SEC chair Gary Gensler’s decision to file an amicus brief in a related Sixth Circuit case backing Ohio’s legal position against Kalshi. Gensler argued that the 2010 Dodd-Frank Act was never intended to give federal agencies authority over sports betting contracts, saying the law was designed to address financial hedging instruments after the global financial crisis — not to preempt state gambling regulation.

Legal observers say the combination of eight simultaneous federal cases, a competing amicus brief from a respected former regulator, and active Sixth Circuit proceedings make Supreme Court review increasingly likely. Until that happens, the legal map for prediction markets will remain fragmented, and players in disputed states may find their options shifting as courts issue rulings. The best sportsbook promotions and traditional licensed books remain the most reliable way to place sports bets in states where regulatory clarity is still developing. Ohio sports betting has been at the center of multiple CFTC disputes, making it one of the most closely watched states in this ongoing national fight.