CFTC Sues New Mexico as Fight Over Prediction-Market Oversight Escalates
Summary
- The US CFTC said it has sued New Mexico over a dispute involving regulatory authority over prediction-market platform Kalshi.
- New Mexico alleged that Kalshi was offering sports betting services that amounted to sports gambling and had also made its platform available to underage users.
- The CFTC, by contrast, said Kalshi's event contracts qualify as derivatives, or swaps, under federal commodities law and that the state's actions encroach on the agency's exclusive jurisdiction.
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The US Commodity Futures Trading Commission sued New Mexico over a growing dispute on who has regulatory authority over prediction-market platform Kalshi.
Cointelegraph reported on June 15 that the CFTC filed suit in federal court against New Mexico Governor Michelle Lujan Grisham, Attorney General Raúl Torrez and officials at the New Mexico Gaming Control Board.
The lawsuit responds to New Mexico's June 4 case against Kalshi. The state argued that Kalshi was offering sports-betting services without the proper license and that sports event contracts on the platform were effectively sports gambling.
New Mexico also alleged that Kalshi had provided services to users younger than 21, the state's legal gambling age.
The CFTC, however, argues that Kalshi's event contracts qualify as derivatives, or swaps, under federal commodities law. It also says Kalshi is a designated contract market under CFTC oversight.
In its complaint, the CFTC said New Mexico's actions interfere with financial products approved by the agency and infringe on the federal oversight framework for commodities derivatives established by Congress.
CFTC Chairman Mike Selig said New Mexico is attempting to apply state gambling law to a federally regulated derivatives exchange. The agency is responsible for protecting its exclusive jurisdiction over the commodities derivatives market, he added.
The lawsuit further escalates tensions between the CFTC and state governments. Rhode Island, Wisconsin, Minnesota, New York, Arizona, Connecticut and Illinois have also engaged in legal fights with the agency over oversight of prediction-market platforms.
