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<p>New Mexico has become the eighth U.S. state drawn into the Commodity Futures Trading Commission’s court battle over prediction markets after the regulator filed a lawsuit seeking to block state enforcement against federally regulated exchanges.</p>
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   <li>The CFTC has sued New Mexico, bringing the number of states targeted in its prediction market jurisdiction fight to eight.</li>
   <li>New Mexico argues Kalshi’s sports event contracts amount to unlicensed sports betting, while the CFTC says the products fall under federal commodities law.</li>
   <li>Former SEC and CFTC Chairman Gary Gensler has challenged the regulator’s legal position, arguing Congress never intended sports betting contracts to be treated as swaps.</li>
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<p>The CFTC <a href="https://www.cftc.gov/PressRoom/PressReleases/9251-26" rel="noopener noreferrer nofollow">said</a> on Friday that it has sued New Mexico Governor Michelle Lujan Grisham, Attorney General Raúl Torrez, and members of the New Mexico Gaming Control Board in federal court, arguing that the state cannot apply its gaming laws to CFTC-registered prediction market platforms.</p>
<p>According to the regulator, New Mexico’s enforcement efforts conflict with federal commodities law because event contracts offered on registered exchanges fall under the agency’s exclusive jurisdiction. The lawsuit asks the court to declare any state laws applied to transactions on CFTC-regulated designated contract markets invalid and to permanently prevent New Mexico from taking action against those platforms.</p>
<p>The filing follows a June 4 <a href="https://nmdoj.gov/press-release/attorney-general-raul-torrez-files-lawsuit-against-kalshi-to-protect-new-mexico-consumers-and-preserve-new-mexico-gaming-laws/" rel="noopener noreferrer nofollow">lawsuit</a> by New Mexico against Kalshi. State authorities alleged that Kalshi was offering sports betting without a license and argued that its sports event contracts functioned in the same way as traditional sports wagers. New Mexico also claimed the platform permitted users between 18 and 20 years old to participate despite the state’s minimum gambling age of 21.</p>
<p>In its complaint, the CFTC argued that event contracts qualify as swaps under federal commodities laws and that Congress granted the agency sole authority to oversee those markets. The regulator said New Mexico was attempting to impose state gaming rules on financial products already approved under the federal regulatory framework.</p>
<p>“New Mexico is the latest state seeking to nullify black letter law and decades of judicial precedent by imposing state gaming laws on federally regulated derivatives exchanges subject to the CFTC’s exclusive jurisdiction,” CFTC Chairman Mike Selig said in a <a href="https://x.com/ChairmanSelig/status/2065517809099026783" rel="noopener noreferrer nofollow">statem</a><a href="https://x.com/ChairmanSelig/status/2065517809099026783" rel="noopener noreferrer nofollow">e</a><a href="https://x.com/ChairmanSelig/status/2065517809099026783" rel="noopener noreferrer nofollow">nt</a>.</p>
<p>Selig added that the agency would continue defending what it considers its exclusive authority over commodity derivatives markets.</p>
<h2 class="wp-block-heading" id="federal-and-state-dispute-expands">Federal and state dispute expands</h2>
<p>With the New Mexico lawsuit, the CFTC has now taken legal action against eight states that have challenged prediction market operators. Rhode Island, Wisconsin, Minnesota, New York, Arizona, Connecticut, and Illinois have also faced lawsuits after state authorities moved against platforms offering event contracts.</p>
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<p>Earlier this year, the regulator filed a similar case against New York after state officials pursued enforcement actions against prediction market offerings linked to Coinbase and Gemini. In that lawsuit, the CFTC sought a declaratory judgment that federal law preempts state gambling statutes when applied to CFTC-regulated exchanges.</p>
<p>The agency’s legal strategy has received support from recent court decisions. In April, the Third Circuit Court of Appeals ruled that New Jersey could not block Kalshi’s sports-related event contracts because authority over those markets rests with the CFTC under the Commodity Exchange Act. Courts in Tennessee have also issued temporary restraining orders limiting state enforcement efforts against Kalshi.</p>
<p>At stake is whether prediction markets operate under a single federal regulatory structure or face separate licensing and compliance requirements in individual states. Previous enforcement actions have included demands for substantial financial penalties and restrictions on market access, according to earlier court filings and public statements from state authorities.</p>
<h2 class="wp-block-heading" id="gensler-questions-sports-contract-classification">Gensler questions sports contract classification</h2>
<p>While the CFTC continues to defend its position in court, former Securities and Exchange Commission and CFTC Chairman Gary Gensler has challenged the agency’s interpretation of federal law.</p>
<p>In an amicus brief submitted Thursday to the Sixth Circuit in Kalshi’s legal dispute with Ohio authorities, Gensler <a href="https://crypto.news/gary-gensler-says-sports-prediction-markets-fall-outside-cftc-swap-rules/" rel="noopener noreferrer nofollow">argued</a> that Congress did not intend sports event contracts to be treated as swaps when it passed the Dodd-Frank Act in 2010.</p>
<p>According to Gensler, the law’s definition of swaps was designed around instruments used to hedge economic risks rather than sports-related outcomes. He wrote that “Congress did not include sports betting contracts within the statutory Dodd-Frank definition of swap” and argued that sports bets rarely serve a hedging purpose.</p>
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<p>Speaking to CNBC on Thursday, Gensler said the central question is whether Congress intended to remove state authority over sports betting matters and transfer it to the federal commodities regulator. He said the answer is “categorically ‘No.’”</p>
<p>Even if the CFTC succeeds in court, the future of sports-related event contracts remains uncertain. A bipartisan group of U.S. senators has proposed legislation that would prohibit sports and casino-style contracts on CFTC-regulated prediction markets, potentially overriding the agency’s position through congressional action.</p>
<p>Read more: <a href="https://crypto.news/aztec-connect-loses-2-1m-after-old-contract-exploit/" rel="noopener noreferrer nofollow"> Aztec Connect loses $2.1m after old contract exploit </a></p>

Kalshi dispute reaches New Mexico as CFTC defends federal oversight claim

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