New Mexico Attorney General Raúl Torrez announced his office’s lawsuit in state court against Kalshi on Thursday, seeking to block access to sporting event-related contract trading on the company’s exchange for people within the state’s borders. With the action, Torrez joins many other state attorneys general who have taken or are currently involved in litigation against Kalshi and other prediction market exchanges.
The suit also comes as tribal gaming authorities within New Mexico’s borders have also sued Kalshi in federal court. These actions resemble a simultaneous effort in Wisconsin from state law enforcement and tribal bodies against prediction markets, scrutinizing the legality of trading contracts for sports events from multiple angles.
Torrez announces suit seeking declaration that trades are tantamount to gambling
According to the press release from Torrez’s office, the complaint that he filed on Thursday alleges that Kalshi “is unlawfully offering online sports betting in New Mexico while attempting to evade state gaming laws and the carefully negotiated framework that governs legal gaming in the state.” The complaint itself begins to make that case by claiming that “Kalshi plays the same role as a traditional sportsbook who offers sports betting by facilitating bets.”
In New Mexico, nearly every form of online gambling remains illegal. Most offline gambling is also illegal outside of tribal casinos that lie within the state’s borders.
Some tribal casinos do offer in-person sports wagering. That is why the lawsuit “seeks injunctive relief to halt Kalshi’s alleged unlawful operations in New Mexico and to prevent the company from continuing to offer sports-related wagering through its platform.”
It’s also why some tribal authorities inside New Mexico have taken their action to protect their interests.
Kalshi also faces lawsuit from tribal authorities in New Mexico
A coalition of four tribal bodies whose sovereign lands lie within New Mexico’s borders sued Kalshi in May. Like Torrez, they are asking the United States District Court for the District of New Mexico to declare Kalshi’s exchange for contracts connected to sporting events a violation of gambling laws.
However, the laws in question are not New Mexico’s gambling laws. Rather, the coalition’s arguments focus on the federal Indian Gaming Regulatory Act (IGRA), which governs tribal gaming in the US.
That argument focuses on tribal sovereignty over gaming on tribal lands, just as Torrez is claiming that New Mexico has the right to adjudicate gambling within its borders. New Mexico isn’t the only place where this combination of state and tribal litigation regarding prediction markets is moving forward.
Wisconsin attorney general and tribal nation making similar efforts
In late April, Wisconsin Attorney General (AG) Josh Kaul sued Kalshi, Polymarket, and others, alleging that they engaged in illegal sports wagering. That action also seeks injunctive relief against the defendants blocking trading of event contracts connected to sports in Wisconsin.
That followed a November filing in the US District Court for the Western District of Wisconsin by the Ho-Chunk Nation. That court denied Kalshi’s motion to dismiss the case in May, meaning that the Ho-Chunk Nation’s claims that Kalshi is violating the IGRA have proceeded.
Kalshi may respond to the New Mexico AG’s lawsuit as it has in many other states, by suing Torrez in the same federal court where the tribal coalition’s case against Kalshi now resides. That could create an opportunity for one of the few federal appellate courts that has not yet weighed in on a dispute between a state government and a prediction market exchange to get involved, with that appellate court being the 10th Circuit. The separate litigation by tribal authorities in New Mexico and Wisconsin could also leave room for divergent opinions on the intersection of laws governing commodities exchanges and the IGRA.
For the moment, Kalshi is a defendant in yet another case involving gambling laws in state court. Torrez’s complaint expands the torrid pace at which the company is racking up billable hours.
