New Mexico is one of more than a dozen states which continue to lock horns with prediction market platforms in court battles, and Polymarket struck the latest blow this week.
The company sued state Attorney General Raúl Torrez and the leadership of the New Mexico Gaming Control Board in federal court on Tuesday. Polymarket wrote that its hand was forced by New Mexico filing a lawsuit against its competitor Kalshi in early June, which Polymarket said led to an “immediate” threat to its own business.
“On June 4, 2026, New Mexico sued another CFTC-designated contract market, Kalshi, on the theory that federally regulated event contract trading constitutes ‘unlicensed online sports betting’,” reads Polymarket’s June 30 filing in the U.S. District Court for the District of New Mexico. The company added that New Mexico took Kalshi to court “apparently without sending a cease-and-desist letter or publicly giving any notice or warning.”
“Polymarket US therefore faces a real and imminent risk of enforcement, exposing it to civil penalties, potential criminal liability, forced cessation of operations within New Mexico, and severe collateral consequences to its nationwide operations,” added the firm.
Polymarket says it tried to talk it through
Polymarket claims in the suit that it tried to talk with New Mexico authorities to hash out the issue and “avoid unnecessary litigation”. It wrote that it requested multiple times that New Mexico defer any enforcement action until a resolution in the state’s litigation with Kalshi or the Commodity Futures Trading Commission (CFTC), but was rebuffed by the state Department of Justice.
The company also noted that Torrez signed on to amicus briefs supporting other states’ efforts to enforce state gaming laws against designated contract markets that are registered with the Commodity Futures Trading Commission (CFTC).
“These actions demonstrate Defendants’ intent to use state law to shut down federally authorized markets despite clear federal preemption,” wrote Polymarket’s counsel. “… The resulting harm of the State’s enforcement would be irreparable. Even a meritless state enforcement action would immediately disrupt Polymarket US’s federally authorized operations, fragment a national market, reduce liquidity, jeopardize critical banking and commercial relationships, undermine user trust, and harm New Mexico residents.”
Polymarket argued that even an implied threat of enforcement, without any actual firm steps being taken against it, forces it “to choose between exercising its federal right to operate nationwide or submitting to unlawful state coercion”.
Polymarket’s lawsuit asks a judge to grant it a preliminary and permanent injunction to prevent New Mexico from enforcing its state gambling laws against the prediction market operator.
New Mexico, same old fight
Polymarket’s lawsuit was the third filed in New Mexico in June in the prediction markets fight.
After Torrez sued Kalshi on June 4 in state court, the CFTC sued the New Mexico AG and other state officials in retaliation in federal court eight days later.
CFTC Chairman Michael Selig said New Mexico and other states are trying to nullify federal law and decades of judicial precedent by imposing state gaming laws on federally regulated derivatives exchanges. The commission and its registered designated contract markets (DCMs), including Polymarket and Kalshi, continually maintain that the CFTC has exclusive jurisdiction over event contracts.
In New Mexico, tribal interests are also involved in the battle. Four in-state tribal bodies sued Kalshi in May, alleging that Kalshi violates state gaming compacts and the Indian Gaming Regulatory Act (IGRA) by offering sports betting without geofencing out tribal lands.
Along with New Mexico, CFTC has sued a total of eight other states over their various plans to regulate, ban, or otherwise tackle prediction markets:
- Arizona
- Connecticut
- Illinois
- Kentucky
- Minnesota
- New York
- Rhode Island
- Wisconsin
Kentucky, which the CFTC sued last week over its plan to tax prediction markets, is the first Republican-governed state to face the ire of the Donald Trump administration’s CFTC.
Like Kalshi and the CFTC, Polymarket is also involved in active litigation with other states, including:
- Massachusetts
- Michigan
- Minnesota
- Nevada
The Nevada Gaming Control Board (NGCB) was granted a preliminary injunction against Polymarket a few weeks ago, before Polymarket was denied the same level of temporary relief against Michigan two weeks ago.
