The state of New Mexico is facing legal blowback from the Commodity Futures Trading Commission (CFTC) after signaling intentions to regulate the prediction market sector in the Land of Enchantment.
In yet another escalation between the federal agency and state lawmakers, a complaint filed on 12 June with the District Court for the District of New Mexico aims to stop regulators from enforcing state gambling laws against prediction market operators overseen by the CFTC.
CFTC seeks judgement to affirm authority on the sector
Governor Michelle Lujan Grisham, Attorney General Raúl Torrez and various members of the New Mexico Gaming Control Board (NMGCB) have been named as defendants in the case. The CFTC hopes the case will cement its authority on prediction markets while diminishing the influence on state officials to rein in its rapid rise.
The defendants are seeking to win the argument that sports-related prediction contracts function much like traditional sports betting but operate outside state licensing and taxation frameworks. They contend that allowing federally regulated prediction markets to offer contracts on game outcomes undermines state gambling laws, reduces tax revenue and weakens consumer protections that licensed sportsbooks must follow.
In its complaint, the CFTC stated: “The CFTC has clear and longstanding exclusive jurisdiction to regulate event contracts and the prediction markets on which they trade under the Commodity Exchange Act, which preempts state laws purporting to regulate designated contract markets.”
CFTC Chairman Michael S. Selig added: “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. As I’ve said repeatedly, the CFTC has the expertise and responsibility to protect its exclusive jurisdiction over commodity derivatives, and that’s exactly what we’ll continue to do.”
Lawsuit comes after Kalshi sanctioned in state
New Mexico Attorney General Raúl Torrez has filed a lawsuit against prediction market operator Kalshi, alleging the company is unlawfully offering sports betting in the state while bypassing established gaming regulations.
The complaint, filed in New Mexico’s First Judicial District Court, argues that Kalshi’s activities constitute a “public nuisance” by contributing to gambling-related harm in a state with a problem gambling rate significantly above the national average. The suit also claims the platform threatens gaming arrangements negotiated between the state and tribal operators.
“Kalshi has ignored that framework entirely while offering online sports betting within the state,” Torrez said in a statement. “We are filing this lawsuit to protect the integrity of our laws, our regulatory system, and most importantly, consumers.”
The legal challenge follows a separate federal lawsuit filed in May by three New Mexico pueblos and one tribe, which alleges Kalshi’s sports event contracts infringe on tribal gaming rights and undermine a key source of revenue for public services. State officials said the two cases represent “separate but complementary tracks” aimed at protecting both state and tribal interests.
Torrez’s lawsuit cites examples of contracts tied to sporting events, including wagers on an NBA conference finals game, and argues they violate state laws that broadly prohibit gambling outside approved regulatory frameworks. The filing also references a 2025 study showing 3.9% of New Mexico adults screened positive for problem gambling, compared with a national average of 1%.
CFTC continues legal onslaught against state governments
The CFTC’s lawsuit against New Mexico marks the agency’s eighth legal challenge against a state over prediction market regulation. The CFTC has sued or intervened against Arizona, Connecticut, Illinois, Minnesota, New York, Rhode Island and Wisconsin as it seeks to assert exclusive federal jurisdiction over event contracts traded on federally regulated exchanges.
In comments made last month, President Donald Trump threw his backing behind the agency. In a confrontational post on his social media network Truth Social, he said: “Under my leadership, we are setting ‘rules of the road’ that are the Gold Standard for the States. We cannot have SCUM like Chris Christie, Letitia James, Tim Walz, and JB Pritzker setting the rules! Other Countries are after this new form of Financial Market, and we want to remain at the top,” he added.
Michael Selig, a former SEC crypto adviser and derivatives lawyer, became the 16th chairman of the CFTC in December 2025 after being nominated by President Donald Trump and confirmed by the Senate.
His leadership is significant because he is currently the only sitting commissioner on the five-member agency, giving him unusual influence over CFTC policy as the regulator fights to establish federal oversight of prediction markets. Selig has emerged as one of the industry’s strongest advocates, arguing that event contracts fall under federal commodities law rather than state gambling regulations.
