CFTC is fighting states over sports-linked prediction markets, as New Mexico’s lawsuit against Kalshi has triggered a renewed federal response.
The state accused Kalshi of illegally operating sports gambling markets without a license and sought an injunction blocking operations and sports-event marketing.
CFTC Asserts Federal Authority
The Commodity Futures Trading Commission filed in federal court to stop New Mexico from applying state gaming laws to federally regulated contract markets.
The agency asked for a declaratory judgment confirming its exclusive authority over event contracts under federal law. It also requested a permanent order barring enforcement of preempted state laws against registrants.
New Mexico said Kalshi lacked licensing and allowed users below the state’s legal gambling age of 21. Attorney General Raúl Torrez said gaming is legal only through tribal-state compacts or strong state rules protecting honest play.
The CFTC said New Mexico’s actions undermine its authority and hinder oversight of swaps under the Commodity Exchange Act.
States Press Sports Market Claims
The dispute is part of a wider clash over whether prediction platforms can offer sports-related contracts without following state gambling laws. The CFTC has sued Wisconsin, Minnesota, Illinois, Arizona, Rhode Island, Connecticut, New York, and New Mexico while seeking federal control.
CFTC Chairman Michael S. Selig said, “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.”
Selig said the commission is obligated to safeguard its regulatory authority over commodity derivatives.
Platforms Welcome Rulemaking
The CFTC proposed rules last week that would let it ban wagers vulnerable to manipulation or inconsistent with the public good. Most sports-related contracts would remain legal, except for injury markets and first-pitch events such as pitch speed. The proposal could also prohibit contracts tied to armed conflict, assassinations, and terrorism.
A Polymarket spokesperson said, “We are fully supportive of the CFTC’s initiative to provide clarity for prediction markets and remain committed to working toward a federal framework that protects the public and supports innovation — we look forward to commenting on the Commission’s proposed rule.”
Kalshi spokeswoman Dani Lever said war-related action markets are already banned on Kalshi. However, prediction-market trading has risen, with suspected insiders reportedly making more than $1 million from contracts tied to the Iran airstrike.
Kalshi CEO Tarek Mansour said traders targeting high-risk markets must submit employment disclosure forms to prevent manipulation. In May, House Oversight Chair James Comer asked Kalshi and Polymarket executives for records after insider trading allegations. Former Rep. George Santos is also under inquiry for using Kalshi to bet on his own State of the Union appearance.
