Recently, Polymarket has taken legal action against New Mexico, becoming embroiled in an ongoing conflict between prediction market platforms and state authorities. On Tuesday, the company filed a lawsuit in federal court against state Attorney General Raúl Torrez and the New Mexico Gaming Control Board. This move was prompted by New Mexico's lawsuit against Kalshi, a competitor to Polymarket, which the company claims created an "immediate" threat to its operations.
In its June 30 filing with the U.S. District Court for the District of New Mexico, Polymarket noted, "On June 4, 2026, New Mexico sued another CFTC-designated contract market, Kalshi, on the theory that federally regulated event contract trading constitutes 'unlicensed online sports betting.'" The filing criticized New Mexico for initiating legal proceedings against Kalshi without prior notice, saying, "apparently without sending a cease-and-desist letter or publicly giving any notice or warning."
The lawsuit asserts that Polymarket US is at significant risk of enforcement actions which could lead to civil penalties, potential criminal liability, mandatory cessation of its New Mexico operations, and far-reaching consequences for its operations nationwide.
Polymarket claims to have attempted to resolve the situation amicably by reaching out to New Mexico officials and requesting they refrain from enforcement actions until the outcome of the litigation involving Kalshi or the Commodity Futures Trading Commission (CFTC). However, Polymarket's attempts were reportedly dismissed by the state's Department of Justice.
Further aggravating Polymarket's concerns, the company points out that Torrez has backed amicus briefs supporting other states seeking to enforce local gaming laws against designated contract markets registered with the CFTC. "These actions demonstrate Defendants’ intent to use state law to shut down federally authorized markets despite clear federal preemption," Polymarket's legal team stated. They warned that enforcement actions could lead to irreversible harm, which would disrupt Polymarket US’s federally authorized activities and create a fragmented national market. This chaos could erode liquidity, undermine important banking and commercial relationships, diminish user trust, and ultimately harm residents of New Mexico.
The firm argued that even an implied threat of enforcement from New Mexico constitutes undue pressure, as it forces Polymarket into an untenable position of either exercising its federal right to operate or capitulating to unlawful state pressure. In response to this situation, Polymarket's lawsuit seeks both a preliminary and permanent injunction to halt New Mexico from imposing state gambling laws against it.
Polymarket's legal maneuver follows a series of lawsuits in New Mexico related to prediction markets. After Torrez's suit against Kalshi on June 4, the CFTC retaliated by suing Torrez and other state officials in federal court just a week later. CFTC Chairman Michael Selig criticized these actions, asserting that New Mexico and other states are trying to undermine federal law by imposing their regulations on federally recognized derivatives exchanges. The CFTC and its registered designated contract markets, including both Kalshi and Polymarket, consistently argue that the CFTC has exclusive jurisdiction over event contracts.
The dispute in New Mexico also includes tribal interests. Four local tribal organizations filed a lawsuit against Kalshi in May, claiming that its sports betting operations breach state gaming compacts and the Indian Gaming Regulatory Act (IGRA) due to a lack of geofencing on tribal lands.
In addition to New Mexico, the CFTC has taken legal action against eight other states for their respective plans to regulate, restrict, or handle prediction markets, including: Arizona, Connecticut, Illinois, Kentucky, Minnesota, New York, Rhode Island, and Wisconsin. Notably, Kentucky was sued last week over a proposal to tax prediction markets, marking it as the first Republican-controlled state facing scrutiny from the CFTC under the Trump administration.
Polymarket is also engaged in ongoing litigation with other states such as Massachusetts, Michigan, Minnesota, and Nevada. Recently, the Nevada Gaming Control Board (NGCB) granted a preliminary injunction against Polymarket, while the company was denied similar temporary relief in its case against Michigan two weeks ago.
