CFTC Sues New Mexico as Fight Over Prediction-Market Oversight Escalates

The US Commodity Futures Trading Commission sued New Mexico in a widening dispute over who has the authority to regulate prediction-market platform Kalshi.

Cointelegraph reported on June 15 that the CFTC filed the lawsuit in federal court against New Mexico Governor Michelle Lujan Grisham, Attorney General Raúl Torrez and officials at the New Mexico Gaming Control Board.

The case is a response to New Mexico's June 4 lawsuit against Kalshi. The state alleged that Kalshi was offering sports-betting services without the proper licenses and that the sports event contracts on its platform were effectively equivalent to sports gambling.

New Mexico also alleged that Kalshi provided services to users under 21, the state's legal gambling age.

The CFTC argues that Kalshi's event contracts qualify as derivatives, or swaps, under federal commodities law. It also says Kalshi is a designated contract market overseen by the agency.

In its complaint, the CFTC said New Mexico's actions interfere with financial products approved by the agency and encroach on the federal oversight framework for commodity derivatives established by Congress.

CFTC Chairman Mike Selig said New Mexico is trying to apply state gambling laws to a federally regulated derivatives exchange. He added that the agency has a duty to protect its exclusive jurisdiction over commodity derivatives markets.

The lawsuit further escalates tensions between the CFTC and state governments. Rhode Island, Wisconsin, Minnesota, New York, Arizona, Connecticut and Illinois have also engaged in legal fights with the agency over the regulation of prediction-market platforms.