The Commodity Futures Trading Commission and the Department of Justice have filed suit against New Mexico in the U.S. District Court for the District of New Mexico, seeking to block the state from applying its gambling laws to sports-event contracts traded on CFTC-registered designated contract markets. The complaint names Governor Michelle Lujan Grisham, Attorney General Raúl Torrez, the New Mexico Gaming Control Board, and its chair and members as defendants, marking New Mexico the eighth state targeted by the CFTC in a coordinated preemption campaign launched on April 2, 2026.
The federal action follows New Mexico Attorney General Torrez’s own lawsuit against Kalshi, filed on June 4, which alleged the platform was conducting illegal sports betting under a 1953 statute that criminalises all gambling not sanctioned through the state’s Gaming Control Act. The CFTC complaint counters that the Commodity Exchange Act grants exclusive federal jurisdiction over event contracts listed on CFTC-registered DCMs, and that New Mexico’s gambling regime is preempted when applied to those instruments.
The federal filing seeks both a declaratory judgment confirming CEA preemption and a permanent injunction barring New Mexico from investigating, threatening, or bringing enforcement actions against DCMs over such contracts – the same dual-relief posture the CFTC has adopted in suits against Arizona, Connecticut, Illinois, New York, Rhode Island, Minnesota, and Wisconsin. The CFTC and DOJ argue that even the threat of state enforcement chills lawful federal markets, a theory courts have so far received unevenly across jurisdictions.
Kalshi is the primary platform at issue in the New Mexico proceedings, operating sports-event contracts on its CFTC-registered DCM and contending that state gambling law cannot reach federally regulated instruments. That argument received its strongest judicial endorsement on April 6, 2026, when a divided Third Circuit panel in KalshiEX LLC v. Flaherty held that the CEA preempts state gambling laws as applied to sports-related event contracts traded on registered DCMs – the first federal appellate ruling to squarely back the preemption theory the CFTC is now advancing in New Mexico. A February 19, 2026 preliminary injunction from the Middle District of Tennessee had earlier blocked state enforcement in that jurisdiction, finding Kalshi’s contracts are likely swaps under the CEA.
The parallel experience in Nevada, where state regulators successfully obtained injunctions against Polymarket in state court, illustrates the divergent outcomes when states pursue enforcement through their own judicial systems rather than waiting for federal action. CFTC Chair Michael Selig has stated there are nearly 50 active legal matters nationwide involving prediction markets and state gambling regulators, a figure that underscores how far the jurisdictional conflict has spread beyond any single platform or state.
Two days before the New Mexico filing, the CFTC released a 267-page notice of proposed rulemaking on prediction markets, which would clarify the agency’s treatment of event contracts while largely preserving operators’ ability to list them on regulated venues. Legal analysts read the timing as deliberate – the NPRM’s 45-day public comment period gives the agency a parallel rulemaking track that could render moot some state arguments, even as the litigation proceeds. The combination of the Flaherty precedent, the NPRM, and eight concurrent state suits signals a federal posture designed to cement preemption before other circuits can rule in states’ favour.
State regulators have consistently argued that retail-facing sports-event contracts are functionally indistinguishable from sports betting, circumvent state licensing frameworks, and raise consumer-protection concerns that federal commodities oversight does not adequately address – a position that has drawn growing congressional scrutiny over where the federal-state boundary in sports gambling regulation should sit. With appeals pending in at least the Third, Fourth, Sixth, and Ninth Circuits, the open question market watchers are now tracking is whether a circuit split materialises before the Supreme Court is asked to settle the scope of CEA preemption for good.
Petra Vanhoof has spent the better part of a decade following the shifting tides of gambling regulation across Europe and beyond. She came up through the compliance side of the industry before pivoting to writing, which gives her a grounded, no-nonsense perspective on the rules, loopholes, and political maneuvering that shape how operators actually do business. She is particularly drawn to the gap between what regulators say and what the market ends up doing in response. Her coverage tends to focus on licensing developments, responsible gambling frameworks, and the ongoing tension between innovation and oversight. She has a sharp eye for the kind of regulatory language that sounds meaningful but leaves operators plenty of room to maneuver, and she enjoys pulling that apart for readers who want the real picture rather than the press release version. Petra is based in the Netherlands and writes with a continental European perspective that she thinks is often missing from English-language gambling coverage. Outside of work she is an avid cyclist and a reluctant but committed amateur poker player who insists the two hobbies have taught her the same lesson: patience matters more than instinct.