The Commodity Futures Trading Commission (CFTC) has filed a lawsuit against the state of New Mexico, seeking a permanent injunction to prevent legislators from enforcing preempted state laws against its registrants.
The lawsuit follows New Mexico’s own legal action against Kalshi on June 5, which alleges the operator’s prediction market offerings amount to unlawful online sports betting.
“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 Michael Selig said.
“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.”
In addition to the permanent injunction request, the CFTC is also seeking a declaratory judgment that federal law grants it exclusive authority to regulate event contracts.
New Mexico’s lawsuit seeks injunctive relief to prohibit Kalshi’s operations across the state and to prevent the operator from continuing to offer sports-related wagering.
The New Mexico Department of Justice also believes Kalshi’s operations “function in the same manner” as sports betting, “undermine” public policy and “threaten the state’s sovereign authority” to regulate gambling activities.
Along with New Mexico, the CFTC highlighted a “growing list” of states attempting to regulate prediction market operators, including legal cases in Arizona, Connecticut, Illinois, New York, Minnesota, Rhode Island and Wisconsin.
The CFTC proposed a regulatory framework for prediction markets on June 10, leading to a response from American Gaming Association (AGA) President & CEO Bill Miller.
The framework provides the CFTC’s definition of gaming for the first-time, described as “any activity that one or more participants typically engage in for purposes of recreation or to entertain others, is governed by rules and includes measurable occurrences or outcomes that depend on the participants’ luck, skill or athletic ability during the activity.“
US Senator Elizabeth Warren issued a letter to CFTC Chairman Michael Selig on June 8, questioning the Commission’s ability to properly regulate prediction markets and cryptocurrency firms
