CFTC Sues New Mexico, Claiming the ‘State Becomes the Latest Attempting to Infringe on Federal Jurisdiction’

The Commodity Futures Trading Commission has filed a lawsuit in federal court against the state of New Mexico, seeking a ruling that federal law gives the agency exclusive authority to regulate certain event-based contracts traded on CFTC-registered exchanges.

The filing comes days after New Mexico sued KalshiEX LLC, a CFTC-registered prediction market operator, in state court. New Mexico alleges that Kalshi’s sports-related event contracts constitute unlawful online sports betting under state law and seeks to stop the company from offering those contracts within the state.

In its federal complaint, the CFTC argues that the Commodity Exchange Act grants the agency exclusive jurisdiction over designated contract markets and the event contracts traded on those exchanges. The agency is seeking a declaratory judgment and an injunction barring New Mexico from enforcing state gaming laws against CFTC-regulated entities in connection with those contracts.

CFTC Chairman Michael S. Selig said the agency’s lawsuit is intended to defend its regulatory authority under federal law. The complaint cites the Commodity Exchange Act and related legal precedent supporting federal oversight of regulated derivatives markets.

The dispute is part of a broader legal battle over the regulation of prediction markets that offer contracts tied to the outcomes of sporting events and other future occurrences. Several states, including Arizona, Connecticut, Illinois, Minnesota, New York, Rhode Island and Wisconsin, have taken action against prediction market operators or challenged the legality of certain event contracts offered within their jurisdictions.

The case could further clarify the division of regulatory authority between federal commodities regulators and state gaming authorities as prediction markets continue to expand.