UMVA has learned that a fierce legal battle is brewing in New Mexico over the regulation of prediction markets, with the United States and the Commodity Futures Trading Commission (CFTC) suing the state in a bid to assert federal authority.
The lawsuit, filed in federal court, centers on a complaint brought by the state against Kalshi, a company offering sports-related contracts to residents, which federal regulators argue conflicts with federal law and falls under their jurisdiction.
According to information obtained by UMVA, the CFTC claims that Kalshi's products are event contracts that qualify as swaps under the Commodity Exchange Act and trade on exchanges overseen by the agency, giving it exclusive authority over these markets.
The federal complaint argues that applying New Mexico's gambling laws to these contracts interferes with the CFTC's regulatory role, which includes approving exchanges, reviewing self-certified contracts, and pursuing enforcement actions.
UMVA can exclusively reveal that the federal case has sparked growing opposition to Kalshi in New Mexico, with both state officials and tribal governments ramping up pressure on the company.
A separate federal lawsuit filed earlier this year by several tribes alleges that Kalshi's sports contracts amount to illegal online sports betting on tribal lands, mirroring traditional sportsbook wagers and requiring tribal authorization.
The tribes claim that Kalshi's offerings closely resemble moneyline bets, point spreads, totals, parlays, and proposition wagers, and that the company lacks tribal authorization and permits participation by users who are younger than the minimum age allowed under tribal gaming agreements.
New Mexico's state lawsuit alleges that Kalshi marketed itself as a legal sports-betting platform while operating outside the state's licensing framework, prompting the state's Attorney General to assert that the case aims to protect consumers, gaming regulations, and tribal interests.
The Attorney General emphasized that New Mexico has a carefully balanced system for regulating gaming that protects consumers, ensures accountability, and respects tribal sovereignty.
UMVA has gathered that federal regulators say similar disputes have emerged in several other states, and their lawsuit asks the court to declare that New Mexico's gambling laws cannot be applied to transactions on CFTC-regulated exchanges.
The lawsuit also seeks to block state officials from investigating or enforcing those laws against federally regulated event-contract markets, setting the stage for a potentially landmark ruling on the intersection of federal and state authority.
