New Jersey is asking the US Supreme Court to settle a question that federal appeals courts have answered two different ways: who gets to regulate sports-event prediction markets, states or the Commodity Futures Trading Commission? On Wednesday, the state became the first to formally escalate the jurisdictional fight to the high court.
Attorney General Jennifer Davenport and interim Division of Gaming Enforcement director Mary Jo Flaherty filed a 332-page petition for a writ of certiorari. They want the justices to decide whether the 2010 Dodd-Frank Act stripped states of the power to regulate sports bets offered on CFTC-registered markets. The filing notes that at least 20 states have already brought civil cases against prediction-market operators.
What is at stake is straightforward. Can Kalshi offer sports-betting products nationwide under one federal license? Or must it comply with each state’s gambling laws one by one?
The petition takes aim at an April ruling from the Third Circuit. There, a 2-1 panel found Kalshi had a “reasonable chance of success” in arguing that the Commodity Exchange Act, as amended by Dodd-Frank, preempted state law. The backstory: New Jersey sent Kalshi a cease-and-desist letter over alleged state gambling-law violations. Kalshi sued. The Third Circuit sided with the platform.
The Ninth Circuit went the other direction last week. In a Nevada case, the appellate court ruled Kalshi failed to show that CFTC oversight preempts state authority to regulate sports betting. That head-on conflict between two circuits is precisely the split New Jersey wants resolved.
CFTC Chair Michael Selig has staked out an aggressive position. The agency claims “exclusive jurisdiction” over prediction markets under the Commodity Exchange Act and has sued several states that moved to restrict Kalshi’s operations. It has also proposed a regulatory framework for prediction markets. The CFTC did not immediately respond to requests for comment.
New Jersey’s petition pushes back on another front. New Jersey’s petition also disputes the CFTC’s classification of sports bets on prediction-market platforms as “swaps” under the agency’s purview, arguing federal law does not preempt state sports-gambling laws regardless of how the contracts are labeled.
The state warns of a paradox in the CFTC’s position. Because federal law prohibits trading swaps off CFTC-registered markets, a win for Kalshi would mean all sports gambling outside such exchanges becomes illegal even where state law permits it.
“Companies like Kalshi claim to offer legal sports betting in all 50 States, but they refuse to follow the gambling laws of any State,” Davenport said in a statement. “These companies have no right to offer their sports bets without following state law, which is why dozens of States across the ideological spectrum have opposed them.”
Davenport said states have “long adopted careful laws to regulate gambling, including to prevent compulsive gambling, gambling by minors, and insider trading on sports games.” She added: “We’re calling on the Supreme Court to resolve this issue and recognize that Congress did not silently make the sports-betting industry immune from state law.”
Kalshi spokesperson Dani Lever said the company disagreed with New Jersey’s decision to appeal. The exchange “cannot be regulated by 50 different regulators,” Lever said. “We remain confident in the lower courts’ rulings, and nothing in New Jersey’s filing today changes our view.”
Whether the Supreme Court takes the case is an open question. The justices could pick up the New Jersey petition, the Nevada case, or an enforcement action against a different company. Whatever they choose, a ruling would settle which authorities can regulate prediction markets. That answer carries implications for adjacent crypto-derivatives products operating under CFTC registration too.
A Polymarket contract on whether the Supreme Court will hear a prediction-markets case is already trading.
