Kalshi, the leading prediction market platform, is the target of yet another lawsuit; this time, New Mexico Attorney General Raul Torrez has the Manhattan-based company in his crosshairs, accusing it of violating state law by offering sports betting contracts under the Commodity Futures Trading Commission’s federal protection, creating a controversial alternative to trusted offshore betting sites.
Kalshi Faces Legal Double-Header
New Mexico has not legalized mobile sports betting, but retail sports wagering is allowed at any one of the state’s six tribal casinos. In a landscape where betting laws by state vary significantly, Kalshi has been offering sports betting contracts throughout the United States, thanks to its federal regulation by the CFTC. That has caused a blizzard of legal battles with several state gaming commissions and attorneys general, with New Mexico now the latest to join the fray.
The lawsuit by New Mexico Attorney General Raul Torrez follows a similar suit already filed in May by the Pojoaque, Sandia, and Isleta pueblos, as well as the Mescalero Apache Tribe. Lauren Rodriguez, chief of staff for the New Mexico Department of Justice, described the state and tribal lawsuits as complementary efforts aimed at addressing similar concerns from different legal angles.
Attorney General Torrez stated, “New Mexico has a longstanding and carefully balanced system for regulating gaming that protects consumers, ensures accountability, and respects tribal sovereignty. The only lawful gaming in New Mexico operates either under tribal-state gaming compacts or under strict state regulations to ensure honest gaming free from corruption, and licenses gaming operators only after they explain how they plan to address compulsive gambling. Kalshi has ignored that framework entirely while offering online sports betting within the state. We are filing this lawsuit to protect the integrity of our laws, our regulatory system, and most importantly, consumers.”
A spokesperson for Kalshi responded, stating, “As other courts have recognized, Kalshi is a regulated, nationwide exchange for real-world events and subject to exclusive federal jurisdiction. It’s fundamentally different from what state-regulated sportsbooks and casinos offer their customers. We are confident in our legal arguments.”
SCOTUS Issue?
Pressure on the prediction market industry is also building in Washington. Nine Democratic members of Congress have asked the Federal Trade Commission to examine whether companies in the sector are presenting conflicting messages to consumers and regulators.
Representatives Kevin Mullin and Gabe Vasquez said some platforms appear to promote themselves using language commonly associated with sports betting while characterizing their products as financial instruments when dealing with regulators. The lawmakers questioned whether those differing descriptions could create confusion about the nature of the services being offered.
Prediction markets have attracted increasing attention in recent months as regulators and lawmakers debate where they fit within existing legal frameworks. The industry faced additional scrutiny in May when congressional inquiries were launched into both Kalshi and Polymarket over concerns related to alleged insider-trading incidents.
Critics argue that some operators market their platforms as a way to wager on sporting events without using a traditional sportsbook, while simultaneously seeking to avoid the gambling regulations that apply to licensed betting companies.
In a letter sent to the FTC, lawmakers requested details on any current or planned investigations involving prediction market firms. They also asked whether consumers have filed complaints about the industry and how the agency evaluates advertising claims when determining whether a company’s public messaging could be misleading.
Kalshi has argued that it is not a sportsbook but rather a prediction market offering sports event contracts. However, the matter has been adjudicated at several different levels, including in state, federal, and appellate courts, some with contradictory rulings.
Many of the rulings, for and against the prediction platforms, are on appeal, and now the CFTC has pivoted from a passive position to a full-throated advocate for its licensees under its newly installed chairman, Michael Selig. This has spurred speculation that jurisdictional authority won’t be fully decided unless the matter is heard before the US Supreme Court, leaving bettors to rely on safer sports betting tips to navigate the shifting landscape in the meantime.
