The Commodity Futures Trading Commission (CFTC) has initiated legal proceedings against New Mexico, intensifying the ongoing conflict surrounding the governance of prediction market platforms and event contracts related to sports results.
The lawsuit, submitted on June 12 in the US District Court for New Mexico, aims to stop the state’s regulators from enforcing New Mexico’s gaming regulations on CFTC-registered prediction market operators. The federal agency has cited Gov. Michelle Lujan Grisham, Attorney General Raúl Torrez, as well as members of the New Mexico Gaming Control Board as parties involved in the case.
The CFTC is seeking a declaratory ruling affirming its jurisdiction regarding event contracts traded within federally regulated markets, in addition to
The complaint states, “The CFTC holds clear and established exclusive authority to oversee event contracts and the prediction markets on which they are exchanged under the Commodity Exchange Act, which takes precedence over state laws that attempt to regulate designated contract markets.”
State’s Action Against Kalshi Sparks Federal Response
This federal move follows New Mexico’s legal action against the prediction market firm Kalshi on June 4.
The state’s lawsuit claims that Kalshi has been providing online sports betting services to residents of New Mexico without acquiring the necessary licenses mandated by state law. New Mexico asserts that the event contracts from the company enable users to bet on sports events in a way similar to conventional sports betting while sidestepping the state’s regulatory framework.
Additionally, the state asserts that Kalshi allowed participation by individuals aged 18 to 20, even though New Mexico’s gambling regulations stipulate a minimum gambling age of 21.
The CFTC argues, however, that federal legislation grants it sole control over event contracts and prediction markets acting as designated contract markets under the Commodity Exchange Act, invalidating state gaming regulations.
Increasing Tension Between State and Federal Officials
The case in New Mexico signifies the latest clash between state regulators and the CFTC regarding prediction market platforms. As per the federal agency, New Mexico marks the eighth state to confront the regulatory standing of such markets, succeeding similar actions in Arizona, Connecticut, Illinois, New York, Minnesota, Rhode Island, and Wisconsin.
CFTC Chairman Michael S. Selig condemned the state’s legal stance, asserting: “New Mexico represents the latest instance where a state seeks to undermine established federal law and decades of judicial precedence by imposing state gaming regulations on federally regulated derivatives markets that fall under the CFTC’s exclusive jurisdiction. As I have consistently maintained, the CFTC possesses the expertise and obligation to uphold its exclusive authority over commodity derivatives, and we will steadfastly continue in this mission.”