The Commodity Futures Trading Commission (CFTC) sued the state of New Mexico on Friday, making an already complicated legal situation even more turbulent as lawsuits fly in multiple directions.
A CFTC news release Friday morning detailed the regulator’s opposition to last week’s suit against Kalshi in state court. As in other jurisdictions, sports event contracts sit squarely at the crux of the fight, as New Mexico seeks to ban prediction market offerings that it says “evade state gaming laws.”
Continuing a stark reversal of its previous opposition to such contracts, the CFTC argues in its federal court filing that it alone maintains authority over such prediction market offerings.
“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,” said CFTC Chairman Michael Selig. “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.”
Kalshi legal fight includes New Mexico tribes, too
While New Mexico sues at the state level and the CFTC sues at the federal level, a separate but equally significant federal court battle continues between Native American tribes and Kalshi.
Four tribal bodies in New Mexico filed suit against Kalshi last month. Their filing contends that Kalshi is violating state gaming compacts and the Indian Gaming Regulatory Act (IGRA) by offering sports betting. The suit stakes its opposition on two claims:
- Kalshi, which permits customers as young as 18 years old, allows underage gaming by people under 21.
- By failing to geofence tribal lands, Kalshi violates IGRA by offering wagering on their reservations.
“The use of prediction markets for gambling purposes diverts essential revenue away from our governments, provides an end-run around regulation of gaming on our lands, and allows gaming by underage people,” Sandia Pueblo Gov. Stuart Paisano said in a statement at the time of the suit.
New Mexico is among the minority of U.S. states not offering any form of legal sports betting. There are, however, six tribal casino locations with in-person sports wagering, including a handful of Caesars-owned properties.
According to Source NM, the four New Mexico tribal bodies drew inspiration for their suit from a similar Native American-led effort in Wisconsin that could slow Kalshi there.
CFTC suing states swiftly in prediction markets cases
As pointed out in its Friday release, the CFTC is waging legal battles against state gaming regulators and tribes who take action against prediction markets in a growing number of jurisdictions:
- Arizona
- Connecticut
- Illinois
- New York
- Minnesota
- Rhode Island
- Washington
- Wisconsin
To date, all of the states facing action by the Republican administration of U.S. President Donald Trump are led by Democratic governors.
