Securities Regulation Daily Wrap Up, FEDERAL PREEMPTION—D.N.M.: CFTC, DOJ sue New Mexico over Kalshi prediction markets regulation, (Jun 15, 2026)
Organizations Mentioned:U.S. Department of Justice
The CFTC and DOJ added New Mexico to a growing list of states they allege are intruding on exclusive federal jurisdiction by regulating prediction markets trading.
Marking the eighth state sued over prediction markets regulation, the CFTC and Department of Justice have filed a new lawsuit to block New Mexico from enforcing state gaming laws against the Kalshi exchange. The lawsuit seeks declaratory and injunctive relief to defend what the CFTC views as its exclusive jurisdiction over event contract trading on CFTC-registered exchanges (U.S. v. New Mexico, No. 1:26-cv-01912 (D.N.M. June 12, 2026)).
“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,” said CFTC Chairman Michael Selig. “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.”
The CFTC has filed similar lawsuits against Arizona, Connecticut, Illinois, New York, Minnesota, Rhode Island, and Wisconsin. The CFTC has also filed amicus briefs on behalf of prediction market litigants in the Sixth and Ninth Circuits.
New Mexico v. Kalshi. The New Mexico Department of Justice (NMDOJ) filed a lawsuit in state court on June 4 against Kalshi, Inc. and KalshiEX LLC, alleging the company is unlawfully offering online sports betting in New Mexico in violation of state gaming laws. The complaint alleges that Kalshi’s online platform functions as a sportsbook, allowing users to place wagers on sporting events while operating outside New Mexico’s licensing and regulatory requirements.
“We are filing this lawsuit to protect the integrity of our laws, our regulatory system, and most importantly, consumers,” said Attorney General Raúl Torrez. “Kalshi has ignored [New Mexico’s regulatory framework for gaming] entirely while offering online sports betting within the state.”
The state said its gaming framework reflects "decades of collaboration" among state leaders, regulators, gaming operators, and tribal governments. The state cited the public health risk of unregulated gambling, especially concerning sports gambling by young men.
The lawsuit seeks an injunction preventing Kalshi from offering sports-related event contracts in the state, and an order that Kalshi must abate the alleged public nuisance caused by its unlawful conduct.
CFTC/U.S. v. New Mexico. The complaint filed by the CFTC and Department of Justice names New Mexico and its governor, attorney general, and gaming regulatory agencies and officials. It states that New Mexico’s June 4 complaint was removed to federal court on June 8.
As in its similar complaints against other states, the CFTC asserts that Kalshi’s event contracts fall under its exclusive jurisdiction because they are “swaps” under the Commodity Exchange Act and the exchanges targeted by New Mexico are CFTC-regulated designated contract markets (DCMs). Therefore, New Mexico is encroaching on CFTC’s exclusive jurisdiction by enforcing state gaming laws against CFTC-registered prediction markets.
“New Mexico’s attempt to prevent a CFTC-regulated DCM from offering CFTC-approved financial products intrudes on the exclusive federal scheme Congress designed to oversee United States commodity derivatives markets,” the CFTC wrote.
The CFTC argues that under the Supremacy Clause of the U.S. Constitution, this comprehensive federal regulatory scheme expressly and impliedly preempts state gambling law as applied to event contracts.
The CFTC seeks:
A declaratory judgment that New Mexico state laws are invalid as applied to transactions listed, offered, or executed on CFTC-regulated DCMs;
A preliminary and permanent injunction prohibiting the defendants and their successors, agents, and employees, from investigating for violations of, or enforcing, New Mexico state laws as applied to transactions listed, offered, or executed on CFTC-regulated DCMs; and
Fees, costs, and other relief as appropriate.
CFTC rule proposal. Amidst the dueling lawsuits, the CFTC announced it is seeking comment on proposed rule amendments concerning event contracts on prediction markets. Among other changes, the proposed rules would define “gaming.” According to Selig, the proposed rules would provide a “durable, transparent framework” to regulate event contracts.
In discussing whether the CFTC determines contracts to be in the “public interest,” the release focuses on the potential for event contracts to inform economic, commercial, and financial decisions. For example, the CFTC said that the price of contracts on how many points a basketball player will score in a game could be factored into models used for commercial forecasting or audience-demand analysis, which are economic questions.
In contrast, the CFTC said that contracts based on purely random events, such as the spin of a roulette wheel or the outcome of a random-number generator, cannot be used to understand market sentiment about any potential economic, financial or commercial consequence.
Comments can be submitted until July 27, 2026.
The case is No. 1:26-cv-01912.
Attorneys: Tiberius T. Davis, U.S. Department of Justice, for the U.S.
LitigationEnforcement: CommodityFutures Derivatives ExchangesMarketRegulation FederalPreemption Swaps NewMexicoNews