Zach Anderson Jun 15, 2026 05:58
The CFTC sues New Mexico to assert federal authority over prediction markets, escalating its battle with state regulators.
The Commodity Futures Trading Commission (CFTC) has filed a federal lawsuit against New Mexico, escalating its ongoing battle over jurisdiction in the regulation of prediction markets. The lawsuit names Governor Michelle Lujan Grisham, Attorney General Raúl Torrez, and members of the state’s Gaming Control Board as defendants, marking the eighth state targeted by the CFTC in this dispute.
The conflict stems from New Mexico’s recent legal action against Kalshi, a federally approved Designated Contract Market (DCM), for allegedly offering illegal sports betting contracts to residents under state gaming laws. New Mexico claims these contracts effectively operate as unlicensed sports gambling and violate the state’s minimum gambling age of 21 by allowing users aged 18 to 20 to participate.
The CFTC, however, argues that event contracts traded on Kalshi are federally regulated swaps under the Commodity Exchange Act (CEA) and fall squarely under its exclusive jurisdiction. In its complaint, the agency stated, “New Mexico’s attempt to apply state gaming laws to federally regulated DCMs intrudes on the exclusive federal scheme Congress has designed for commodity derivatives markets.”
Broader Implications for Prediction Markets
The lawsuit is part of a larger preemption battle between the CFTC and several states, including Rhode Island, Wisconsin, and Minnesota, which have also sought to regulate prediction markets under state gaming laws. Federal courts in some jurisdictions, such as Nevada and New Jersey, have sided with the CFTC, affirming its authority over these markets. However, the fight is far from settled, especially as state regulators push back against what they view as federal overreach.
The CFTC’s efforts come at a time when it is seeking to formalize rules for prediction markets. On June 10, 2026, the agency advanced a proposed rule to permit sports event contracts on prediction platforms, with specific limits to address public interest concerns. This could provide the regulatory clarity the industry and market participants have been seeking—but only if the jurisdictional disputes can be resolved.
Gary Gensler Challenges CFTC’s Claim
Gary Gensler, former chair of both the CFTC and Securities and Exchange Commission, has publicly questioned the agency’s authority over sports event contracts. In an amicus brief filed in a similar case involving Kalshi in Ohio, Gensler argued that the 2010 Dodd-Frank Act, which governs swaps and commodity derivatives, was never intended to include sports betting. He emphasized that sports contracts lack the traditional hedging purposes central to the CEA’s definition of swaps.
“The key question is whether Congress intended to strip states of their regulatory role in sports betting,” Gensler said during an appearance on CNBC. “The answer is categorically no.”
What’s Next?
The outcome of the CFTC’s lawsuit against New Mexico could set a precedent for how prediction markets are regulated nationwide. If federal courts side with the CFTC, it could reinforce the agency’s claim of exclusive authority over platforms like Kalshi, potentially paving the way for broader adoption of prediction markets. A ruling in favor of state regulators, however, could complicate the market landscape, leaving platforms to navigate a patchwork of state and federal rules.
Traders and industry stakeholders should keep an eye on the court’s decision, as well as the CFTC’s pending rulemaking on sports event contracts, which could reshape the regulatory environment for prediction markets in the coming months.
Image source: Shutterstock
