If It Quacks Like a Sportsbook: New Mexico AG Sues Kalshi Over Alleged Illegal Sports Betting

^{Kalshi has not yet sought a sportsbook license in New Mexico, which is the basis for the lawsuit filed by Attorney General Raul Torrez. (Photo: Roberto E. Rosales / Albuquerque Journal via ZUMA Wire)}

New Mexico Attorney General Raul Torrez joined the growing list of officials across the United States targeting prediction markets on Thursday as he announced he had filed a lawsuit against Kalshi for allegedly offering sports betting in violation of state laws.

The lawsuit, filed in the First Judicial District Court in Santa Fe, calls Kalshi a “public nuisance” that threatens state gaming compacts involving tribal interests in the state.

State Joins Pueblos in Legal Fight Against Kalshi

The move follows a lawsuit filed in May by the Pojoaque, Sandia, and Isleta Pueblos, along with the Mescalero Apache Tribe, against Kalshi, in which the Native American groups said the prediction market was violating tribal compacts and both state and federal laws.

Torrez's lawsuit says that Kalshi is contributing to compulsive gambling activity in a state that already has a problem gambling rate more than three times higher than the national average.

“Despite looking like a sportsbook, acting like a sportsbook, and proverbially quacking like a sportsbook, neither Kalshi nor any of its subsidiaries have sought licensure from New Mexico’s Gaming Control Board or otherwise abided by the State’s laws governing gambling and gaming within its borders,” the lawsuit states.

Torrez also argues that because Kalshi allows users as young as 18 to trade contracts on its platform, it is violating state laws that limit gambling to those ages 21 and over.

Kalshi and other prediction markets argue that they are federally regulated exchanges under the sole regulatory authority of the Commodity Futures Trading Commission (CFTC), and that they offer a fundamentally different product than sportsbooks. The CFTC and the federal government have come to the defense of prediction markets by launching lawsuits against several states seeking to act against the platforms.

Prediction Market Battle Appears Destined for Supreme Court

Results in these cases have varied, with some judges finding that the CFTC’s regulatory jurisdiction is absolute in this case. Others have sided with the states, with Nevada even obtaining preliminary injunctions against Kalshi and Polymarket in order to keep them from operating in the Silver State. It’s likely that the New Mexico case will be fought on similar grounds.

“By offering unlicensed online sports betting – including to underage players – Kalshi violates numerous provisions of New Mexico’s Criminal Code and Gaming Control Act,” the lawsuit reads. “In doing so, Kalshi threatens the health, safety, and welfare of New Mexico residents, and flouts the State’s sovereign authority.”

Given the high-level legal questions about regulation and the conflicting results in both state and federal courts so far, the battles between prediction markets and state regulators are likely to end up in the Supreme Court in the near future.

But until then, both state and tribal interests are likely to continue taking action against what they see as illegal operators that have far overstepped their bounds.

“We respect and support the separate action filed by tribal governments in May to protect their sovereign interests,” New Mexico Department of Justice Chief of Staff Lauren Rodriguez said in a statement. “We view these efforts as separate but complementary tracks that together defend both the State’s interests and the integrity of tribal gaming in New Mexico.”