Polymarket Sues New Mexico to Prevent ‘Imminent and Irreparable Harm’

• Polymarket has levied a lawsuit against New Mexico, including Attorney General Raúl Torrez
• The suit is in response to New Mexico’s recent legal action against prediction market operator Kalshi
• The action seeks to prevent “imminent and irreparable harm” arising for New Mexico’s enforcement of state gambling laws

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Polymarket officials are hoping to prevent “imminent and irreparable harm” stemming from New Mexico’s recent enforcement of state gambling laws against federally regulated derivatives exchanges.

Polymarket sued several New Mexico Gaming Control Board members, as well as Attorney General Raúl Torrez, in direct response to the state’s recent lawsuit against prediction market operator Kalshi. Polymarket filed its lawsuit in U.S. District Court for the District of New Mexico.

“This action seeks to prevent imminent and irreparable harm arising from New Mexico’s enforcement of state gambling laws against federally regulated derivatives exchanges—enforcement Congress has expressly prohibited. Plaintiff QCX LLC d/b/a Polymarket US operates a lawful, nationwide designated contract market subject to the exclusive jurisdiction of the Commodity Futures Trading Commission (CFTC),” counsel for Polymarket wrote in the lawsuit.

Threat to Polymarket is ‘Immediate’

According to Polymarket counsel, the state’s threat to the prediction market operator is “immediate” following its legal action against fellow prediction marker operator Kalshi.

Torrez announced the New Mexico Department of Justice (DOJ) filed a lawsuit against Kalshi, Inc., and KalshiEX LLC, alleging the prediction market company operates illegal sports betting in the state. The complaint, filed in State of New Mexico First Judicial District Court County of Santa Fe, alleges Kalshi’s online platform allows users to engage and wager on the outcome of sports through its sports event contract markets.

The lawsuit seeks injunctive relief to halt Kalshi’s sports event contract market in the state.

New Mexico’s enforcement of state gambling laws, which Polymarket believes has no regulatory authority over the CFTC-licensed platform, would cause irreparable harm to the company.

“Even a meritless state enforcement action would immediately disrupt Polymarket US’s federally authorized operations, fragment a national market, reduce liquidity, jeopardize critical banking and commercial relationships, undermine user trust, and harm New Mexico residents. Even the threat of enforcement forces Polymarket US to choose between exercising its federal right to operate nationwide or submitting to unlawful state coercion. The resulting disruption to a nationally uniform market cannot be remedied through damages. And the chilling effect on lawful activity and the deprivation of New Mexico residents’ access to a federally regulated exchange is precisely the harm Congress sought to prevent when it vested the CFTC with sole regulatory authority over derivatives traded on designated contract markets,” Polymarket counsel wrote in the lawsuit.

Polymarket requests a preliminary and permanent injunction on the defendants from enforcing New Mexico state gambling laws on the prediction market operator.

Joins CFTC in Legal Action

Polymarket joined the CFTC in taking legal action against the state. The CFTC also recently filed a lawsuit in response to Torrez’s suit against Kalshi.

The CFTC filed its lawsuit in U.S. District Court for the District of New Mexico, seeking a declaratory judgement that federal law grants the CFTC exclusive authority to regulate event contracts.

The CFTC lawsuit reaffirms its “clear and longstanding exclusive jurisdiction” to regulate event contracts and the prediction markets under the Commodity Exchange Act (CEA).

“The United States and the Commission are injured by New Mexico’s enforcement efforts. The federal government has a statutorily protected interest in maintaining exclusive jurisdiction over transactions involving swaps on DCMs, as well as in administering the CEA’s comprehensive regulatory structure. New Mexico, however, is attempting to block the operation of exchanges that the Commission has expressly approved, as well as event contracts that have been self-certified to the Commission and that the Commission has permitted to be listed. These consequences directly harm the federal government’s sovereign, legally protected interest in enforcing federal law,” CFTC counsel wrote in the lawsuit.

The CFTC lawsuit requests preliminary and permanent injunctive relief against the state.