CFTC Escalates Multi-State War Over Prediction Markets, Suing Kentucky and New Mexico to Assert Exclusive Federal Jurisdiction

The federal derivatives regulator is now the plaintiff, taking at least ten states to court to stop them from applying gaming and consumer-protection laws to event-contract platforms like Kalshi.

Over 11 days in June, the Commodity Futures Trading Commission filed federal lawsuits against two more states — New Mexico and Kentucky — as part of a widening campaign to establish that it, and it alone, gets to regulate the prediction markets where people trade "event contracts" on everything from elections to sports outcomes. In both cases the agency is not defending itself; it is going on offense, suing the states directly to block them from enforcing their own laws against CFTC-registered exchanges.

What actually happened

The sequence in each state is roughly the mirror image of the other, but the pattern is the same: a state moves against a prediction-market operator, and the CFTC sues the state.

New Mexico (CFTC suit filed June 12, 2026). According to the CFTC's own release, New Mexico filed suit in state court "just last week" — so in early June — against KalshiEX LLC, the operator of the Kalshi exchange. The state alleged that Kalshi's offerings "amount to unlawful online sports betting" and are an attempt to "evade state gaming laws," and it asked the state court for an injunction to halt Kalshi's operations in New Mexico and stop it from offering sports-related event contracts (CFTC release 9251-26). The CFTC responded on June 12 by suing New Mexico in federal court, seeking a declaratory judgment that federal law gives it exclusive authority over event contracts, plus a permanent injunction barring the state from enforcing what the agency calls "preempted state laws" against its registrants.

Kentucky (CFTC suit filed June 23, 2026). Kentucky went further than a single lawsuit. Per CFTC release 9260-26, the state filed civil enforcement actions in state court against CFTC-regulated designated contract markets (DCMs) seeking "large monetary penalties," and — separately — created a "new special transaction fee" on those DCMs that the CFTC characterizes as an effort "to encourage these platforms to shut down in the state." The CFTC sued Kentucky to block both. (The releases do not name the penalty amounts or the size of the Kentucky fee, and do not list which DCMs Kentucky targeted.)

The legal theory in both suits is identical: the Commodity Exchange Act grants the CFTC exclusive jurisdiction over event contracts and the designated contract markets that list them, and that federal authority preempts conflicting state law. Chairman Michael S. Selig framed New Mexico as "the latest state seeking to nullify black letter law and decades of judicial precedent," and framed Kentucky as "the latest state attempting to shut down federally-regulated event contracts."

This is a national fight, not two isolated cases

Read together, the two releases show a docket spanning at least ten states — and the two lists don't fully match, which is worth flagging.

The June 12 New Mexico release says New Mexico joined litigation the CFTC already had underway in Arizona, Connecticut, Illinois, New York, Minnesota, Rhode Island, and Wisconsin. The June 23 Kentucky release, by contrast, names only Minnesota, Illinois, and Rhode Island as states the CFTC has "also initiated legal proceedings against," and adds that the agency has filed amicus briefs with the U.S. Courts of Appeals for the Sixth and Ninth Circuits and the Supreme Judicial Court of Massachusetts. The later release's shorter list appears to be selective rather than a correction — nothing suggests Arizona, Connecticut, New York, or Wisconsin dropped out — but the CFTC does not reconcile the two, so the precise, current count of active suits is not stated in either release.

Combining both releases, the states named as being in the CFTC's crosshairs are: New Mexico, Kentucky, Arizona, Connecticut, Illinois, New York, Minnesota, Rhode Island, and Wisconsin, plus Massachusetts (amicus).

Key facts

• June 12, 2026 — CFTC sues New Mexico in federal court, seeking a declaratory judgment of exclusive federal jurisdiction and a permanent injunction against state enforcement (CFTC release 9251-26).
• Early June 2026 — New Mexico sued KalshiEX LLC in state court, alleging its prediction markets are "unlawful online sports betting" and seeking to halt its operations and sports contracts (per CFTC release 9251-26).
• June 23, 2026 — CFTC sues Kentucky; Kentucky had filed state-court enforcement actions seeking "large monetary penalties" against CFTC-regulated DCMs and created a "special transaction fee" the CFTC says was meant to push them out of the state (CFTC release 9260-26).
• States the CFTC names as targets: New Mexico, Kentucky, Arizona, Connecticut, Illinois, New York, Minnesota, Rhode Island, Wisconsin — plus a Massachusetts amicus brief (both releases).
• Appellate front: amicus briefs filed at the Sixth and Ninth Circuits and the Supreme Judicial Court of Massachusetts (CFTC release 9260-26).
• Not stated: penalty amounts, the Kentucky fee's size, case numbers, and any ruling on the merits in any of these cases.

The real-world read

Both sources are the CFTC talking about itself. These are the agency's own press releases — Tier 1 as primary documents of what the CFTC filed and said, but they are also litigation messaging from an interested party. Every characterization of the states' motives ("to encourage these platforms to shut down," "evade... jurisdiction," "nullify black letter law") is the plaintiff's framing. We have the CFTC's description of what New Mexico and Kentucky did, not the states' own complaints or defenses. The states presumably argue that offering paid wagers on sports outcomes is gambling regulated by them — a position the releases wave away rather than engage.

"Black letter law" that requires ten lawsuits and three appellate amicus briefs is not, in practice, settled. Selig asserts "clear and longstanding exclusive jurisdiction" and "decades of judicial precedent." Maybe — but an agency that had an open-and-shut case wouldn't be litigating simultaneously in the Sixth Circuit, the Ninth Circuit, the Massachusetts high court, and the trial courts of at least nine states. The volume of parallel litigation is itself evidence that preemption over sports-and-event contracts is genuinely contested. The confident tone is advocacy, not a description of a resolved question.

The unnamed beneficiary is the industry. Kalshi is the only operator named, and only in the New Mexico release, but the CFTC's position — that states can't touch its registrants — is precisely what every prediction-market platform wants. The agency and the companies it regulates are, functionally, on the same side against the states here. That alignment doesn't make the CFTC wrong on the law, but readers should notice that "protecting federal jurisdiction" and "protecting Kalshi's revenue in 50 states" point in the same direction.

What's conspicuously missing: any figures (the "large" penalties, the Kentucky fee), any case outcomes, and any acknowledgment that the states' core objection — that these look a lot like sports betting — has real substance in states that heavily regulate or tax gambling. The releases also don't reconcile their own differing state lists.

Opinion, and whose

• CFTC / Chairman Michael S. Selig: that federal law gives the CFTC exclusive jurisdiction over event contracts, that states are unlawfully trying to "nullify black letter law," and that prediction markets "provide Kentuckians with valuable information" and "risk management products" businesses rely on — an editorial framing of the products' value, attributed to Selig, not an established fact.
• New Mexico (as characterized by the CFTC): that Kalshi's sports contracts are "unlawful online sports betting" evading state gaming law.
• Everyone else — the courts: No judicial ruling on the merits is reported in either source. Who is right on preemption remains undecided.

Sources

• CFTC Release 9251-26 (June 12, 2026), "CFTC Sues New Mexico…" — primary; provided the New Mexico suit, the Kalshi state-court action, the CFTC's legal theory and requested relief, and the seven-state list. Government litigation communication from an interested party; framing is the CFTC's.
• CFTC Release 9260-26 (June 23, 2026), "CFTC Sues Kentucky…" — primary; provided the Kentucky suit, the enforcement actions and "special transaction fee," the Selig quote, the shorter three-state list, and the appellate amicus filings. Same caveat: the plaintiff's own account.

This is news reporting, not financial, legal, or betting advice.