Prediction Markets Battle: CFTC Sues New Mexico Over Kalshi

⏱ 4 min read

The federal government has opened another front in the fight over prediction markets. On Friday, June 12, 2026, the Commodity Futures Trading Commission (CFTC) sued the state of New Mexico in federal court, seeking to stop state officials from applying gambling laws to federally regulated exchanges such as Kalshi. It is the eighth state the regulator has sued to defend what it calls its exclusive authority over sports event contracts.

The filing in the U.S. District Court for the District of New Mexico names Gov. Michelle Lujan Grisham, Attorney General Raúl Torrez, and other officials. It lands days after New Mexico itself sued Kalshi, accusing the platform of running an unlicensed sportsbook and letting users aged 18 to 20 trade despite the state’s minimum gaming age of 21. The clash crystallizes a question now splitting courts nationwide: are sports event contracts federal derivatives, or are they sports betting that states can ban?

CFTC sues New Mexico over Kalshi

The CFTC’s case rests on the Commodity Exchange Act (CEA), which the agency argues preempts state laws aimed at designated contract markets it oversees. Chairman Michael Selig framed New Mexico as the latest state trying to override settled law and decades of judicial precedent by forcing state gaming rules onto federally regulated exchanges. The complaint seeks a declaratory judgment confirming federal authority and a permanent injunction blocking New Mexico from enforcing its gaming laws against the contracts.

New Mexico, where legal sports betting is currently limited to brick-and-mortar tribal casinos, sees it differently. AG Torrez says the contracts amount to unlicensed wagering. “Kalshi has ignored that framework entirely while offering online sports betting” within the state, he said.

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Eight states and the legal split

With New Mexico, the CFTC has now sued eight states — joining Arizona, Connecticut, Illinois, New York, Minnesota, Rhode Island, and Wisconsin. Every state targeted so far is led by a Democratic governor, while the campaign is driven by the Republican administration of President Donald Trump. Operators have largely avoided state oversight in court, with the notable exception of losses in Nevada that forced shutdowns there.

The two sides are arguing past each other on nearly every point:

Question	State regulators’ position	CFTC & operators’ position
Who regulates these contracts?	States, under traditional gambling police powers	The CFTC, under exclusive federal jurisdiction
What are they?	Sports wagers dressed up as event contracts	Swaps and derivatives traded on regulated exchanges
Controlling law	State gaming statutes and tribal compacts	The federal Commodity Exchange Act preempts them
Court record so far	Wins in Nevada forcing shutdowns	Multiple injunctions protecting the exchanges

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New CFTC rules back most sports contracts

The lawsuit arrived the same week the CFTC unveiled proposed rules that, for the first time, would explicitly bless most sports-related event contracts. Under the draft, exchanges could offer yes/no contracts on moneylines, point spreads, and player props. The agency would, however, prohibit higher-risk, more easily manipulated markets — such as contracts tied to injuries, officiating decisions, and micro-bets.

Opponents were unmoved. Mick Mulvaney, executive director of the “Gambling is Not Investing” coalition, called state and tribal authority over sports gambling “settled law.”

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What it means for bettors and operators

For licensed sportsbooks, the stakes are straightforward: a federally protected prediction market can offer near-betting products nationwide without the state licenses, tax rates, and consumer-protection rules that bind traditional operators. For bettors, the practical effect is a patchwork — the same Kalshi contract may be available in one state and blocked in the next, depending on which court ruled last.

• Regulatory uncertainty is now the defining risk for the prediction-market sector heading into a major sports calendar.
• A circuit split — with operators winning federally while losing in some state courts — raises the odds of eventual Supreme Court review.
• Age and integrity gaps, like New Mexico’s 18-to-20 complaint, will keep fueling state pushback regardless of the jurisdictional outcome.

At Growl Games, we’ll keep tracking how this federal-versus-state fight reshapes where and how players can wager.

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Sources

Primary regulator statements and court-filing coverage cross-checked across multiple outlets.

The CFTC has the expertise and responsibility to protect its exclusive jurisdiction.

— Michael Selig, Chairman, U.S. Commodity Futures Trading Commission · On suing New Mexico, June 12, 2026