In an unusual federalism showdown, the U.S. government — through the Commodity Futures Trading Commission (CFTC) — filed lawsuits in April 2026 against three states, alleging they had unlawfully attempted to regulate prediction-market operators like Kalshi and Polymarket as gambling businesses. The defendants:

  • Connecticut
  • Arizona
  • Illinois

The lawsuits, reported by PBS NewsHour and NPR, asserted that the CFTC has “exclusive jurisdiction” over prediction markets under the Commodity Exchange Act and that state efforts to enforce gambling laws against these platforms are federally preempted.

The litigation puts a new structural pressure on the legal landscape around the federal lawsuit four NM tribes filed against Kalshi on May 12, 2026: if the federal government is actively suing states to stop them from enforcing gambling laws against prediction markets, that posture cuts against tribal claims under similar legal theories.

The federal argument

According to NPR’s coverage, the CFTC’s position is that:

“The CFTC asserts it has ‘exclusive jurisdiction’ over prediction markets and promised to fight state regulatory efforts in court.”

This builds on the same preemption argument the CFTC has made in multiple amicus briefs throughout 2026 supporting Kalshi against state regulators — including in the Ninth Circuit, Massachusetts Supreme Judicial Court, and Sixth Circuit. The April 2026 affirmative lawsuits go further: rather than supporting a private defendant’s preemption defense, the federal government is now actively suing states to enjoin them from enforcing gambling laws.

The state targets — and why

The three states targeted in April 2026 represent different regulatory postures and different prediction-market platforms:

  • Connecticut — has had cease-and-desist orders against prediction-market operators
  • Arizona — filed criminal charges against Kalshi in March 2026 for operating illegal gambling without a license
  • Illinois — has issued enforcement actions against prediction-market operators

According to Stateline’s March 6, 2026 report, officials in at least 11 states had sent cease-and-desist orders to prediction-market companies by early 2026. Three of those were chosen for federal challenge — notably Arizona, which had taken the most aggressive criminal-law approach.

Polymarket’s parallel federal lawsuits

The federal government is not alone in pressing the preemption argument. Polymarket — Kalshi’s main prediction-market competitor — filed its own federal lawsuits in 2026 against state regulators:

  • February 2026: Polymarket sued Massachusetts Attorney General Andrea Joy Campbell in Boston federal court, alleging state overreach
  • March 4, 2026: Polymarket US filed federal suit against Michigan Attorney General Dana Nessel and state gaming officials, seeking to block enforcement of state gambling laws against its event contracts

In parallel, Nevada Gaming Control Board filed civil enforcement against Polymarket in January 2026, arguing that Polymarket’s event contracts, including sports event contracts, violate Nevada gaming law unless offered through the state’s licensed gaming system.

The state pushback

States have not been quiet. 38 state attorneys general filed coordinated amicus briefs and statements supporting Massachusetts in its Kalshi case as of April 2026, per Bettors Insider. The state coalition argues that:

  • Federal preemption was never intended to displace state gambling regulation
  • Sports event contracts are economically indistinguishable from sports wagers
  • States retain traditional police-power authority over gambling regulation

Litigation between prediction-market platforms and states has occurred in at least eight states, per Stateline. The state-court trend has been mixed: pro-state in Massachusetts, Ohio, and Nevada; pro-Kalshi in the Third Circuit and (preliminarily) in Tennessee.

What it means for NM tribes

The federal lawsuits against Connecticut, Arizona, and Illinois don’t directly implicate NM, but they signal something important: the executive branch of the federal government — through the CFTC and Department of Justice — has affirmatively positioned itself against state and (by extension) tribal gambling regulation of prediction markets.

That posture cuts against the legal theory underlying the NM tribes’ May 12 federal Kalshi suit. The tribes argue, in part, that Kalshi violates the Indian Gaming Regulatory Act (IGRA) and the 2015 Class III tribal-state gaming compacts. The federal preemption argument the CFTC is now making against states would also reach claims sounding in IGRA — though tribal lawyers will argue that federal Indian law has its own preemption framework rooted in tribal sovereignty that operates differently from ordinary state-vs-federal preemption.

That question is largely untested. The NM federal court could be the first to address whether the CFTC’s preemption theory extends to tribal gaming jurisdiction under IGRA.

The Supreme Court trajectory

With states, the federal government, and prediction-market platforms all litigating in parallel, most legal observers now expect the Supreme Court to grant certiorari on at least one of the underlying preemption cases by late 2026 or early 2027. Prediction market traders themselves currently price roughly a 64% probability the Supreme Court will accept a sports event contract case by the end of 2026, per Sportico.

What it means for NM bettors

Nothing changes at NM tribal sportsbook counters today. The five legal NM books — Santa Ana Star, Isleta + BetMGM, Inn of the Mountain Gods, Buffalo Thunder, and Route 66 — continue to operate retail-only. Online sports betting in NM remains illegal under state and tribal law. Kalshi continues to accept users from NM as litigation works through the courts.

The state-federal-tribal three-cornered fight is unprecedented in modern gambling law, and the resolution will likely reshape the legal foundation of sports betting in tribal-exclusive states like NM for years to come.