CFTC sues New Mexico over Kalshi prediction market jurisdiction
In brief
- CFTC sued New Mexico Governor Michelle Lujan Grisham and state officials over Kalshi prediction markets
- New Mexico is the eighth state CFTC has sued over prediction market jurisdiction disputes
- Former CFTC chair Gary Gensler argued Dodd-Frank Act does not cover sports event contracts
The dispute over Kalshi
New Mexico sued Kalshi on June 4, arguing the company is offering sports betting without a license. The CFTC countered by claiming event contracts are swaps under federal commodities laws, and that Kalshi operates as a Designated Contract Market under the CFTC's exclusive jurisdiction.
New Mexico also alleged that Kalshi allowed users aged 18-20 to use the platform, below the state's minimum gaming age of 21. The state viewed this as an additional violation of its consumer protection rules.
Gensler's skepticism
In a significant wrinkle, Gary Gensler, the former chair of both the SEC and CFTC, filed an amicus brief to the Sixth Circuit in Kalshi's fight with Ohio's authorities. His intervention casts doubt on the federal regulator's legal theory.
Gensler argued that the Dodd-Frank Act was not meant to encompass sports event contracts. The 2010 law, passed in response to the financial crisis, was designed to regulate swaps—financial instruments used for hedging. Sports bets don't fit that mold.
Congress did not include sports betting contracts within the statutory Dodd-Frank definition of swap
— Gary Gensler, former CFTC chair
Broader pattern
Rhode Island, Wisconsin, Minnesota, New York, Arizona, Connecticut and Illinois have also faced CFTC lawsuits over prediction market jurisdiction. The pattern reveals a fundamental conflict: states claim authority over betting within their borders, while the CFTC asserts that event contracts fall under federal commodities regulation.
CFTC Chairman Mike Selig stated that the CFTC has the expertise and responsibility to protect its exclusive jurisdiction over commodity derivatives. His position reflects the agency's aggressive defense of its turf. Yet Gensler's amicus filing suggests the legal ground beneath the CFTC's claims may be shakier than the agency believes.
