New Jersey has asked the U.S. Supreme Court to decide whether prediction markets such as Kalshi can offer sports betting nationwide without complying with state gambling laws, bringing a rapidly growing regulatory fight to the nation’s highest court.
New Jersey Attorney General Jennifer Davenport and Mary Jo Flaherty, interim director of the state Division of Gaming Enforcement, filed a petition Wednesday asking the justices to overturn an April ruling that prevented New Jersey from enforcing its sports-gambling laws against Kalshi. The state wants the Supreme Court to decide whether the 2010 Dodd-Frank Act bars states from regulating sports bets offered through markets registered with the Commodity Futures Trading Commission.
The Supreme Court has not agreed to hear the case. New Jersey’s filing is a petition for certiorari asking the justices to take it up.
A writ of certiorari is the legal mechanism for asking the U.S. Supreme Court to review a lower-court decision. Filing the petition does not mean the justices will hear the case. The Court has broad discretion over which appeals it accepts, and generally agrees to review only a small fraction of the petitions it receives. A conflict between federal appeals courts, such as the competing Third and Ninth Circuit rulings involving Kalshi, can make a case more likely to draw the Court’s attention because the same federal law is being interpreted differently in different parts of the country.
The request comes just days after another federal appeals court reached the opposite conclusion in a closely watched Nevada case, creating a direct split over whether sports contracts traded on federally regulated prediction markets remain subject to state gambling laws.
Kalshi operates what federal law calls a designated contract market, or DCM, registered with the CFTC. Rather than describing its sports offerings as traditional wagers, the company allows users to buy and sell event contracts tied to outcomes such as which team will win a game or whether a particular event will occur during a contest.
A contract might allow a trader to take a “yes” or “no” position on an outcome. Its price changes as traders assess the likelihood of the event, and the winning position pays out when the event is resolved. Kalshi also offers markets involving elections, economic data, weather, and other subjects.
The legal dispute centers on whether those sports contracts are federally regulated financial instruments or sports wagers that states retain authority to regulate.
That distinction carries major consequences.
Traditional sportsbooks generally operate under state licenses and must comply with state-specific requirements concerning age limits, permissible wagers, consumer protections, and taxes. Prediction markets contend that their contracts are governed instead by the federal Commodity Exchange Act and CFTC oversight.
New Jersey argues that allowing the federal designation to displace state gambling law creates a route around regulations that apply to conventional sportsbooks.
“These companies have no right to offer their sports bets without following state law,” Davenport said in announcing the Supreme Court challenge, according to Reuters. She pointed to opposition from states across the political spectrum.
The case began after Kalshi started offering sports-related event contracts in early 2025.
New Jersey regulators sent the company a cease-and-desist letter, arguing that the contracts violated state gambling laws and New Jersey’s constitutional restrictions on certain collegiate sports wagering. The state threatened enforcement action if Kalshi did not stop offering the contracts and void existing wagers.
Kalshi responded by suing New Jersey in federal court.
The company argued that the Commodity Exchange Act gives the CFTC exclusive authority over contracts traded on federally designated markets, leaving states without power to regulate the same transactions under their gambling laws.
A federal district judge granted Kalshi a preliminary injunction, and the U.S. Court of Appeals for the Third Circuit upheld it on April 6 in a 2-1 decision.
The Third Circuit concluded that Kalshi’s sports-event contracts fit within the federal definition of “swaps” because payments depend on events associated with potential financial, economic, or commercial consequences. Because the contracts are traded on a CFTC-licensed market, the majority found that federal law likely preempts New Jersey regulation.
The court pointed to the economic activity surrounding professional and collegiate sports, including television networks, advertisers, sponsors, and franchises, in concluding that the outcomes of sporting events can have economic consequences.
New Jersey now argues that reading Dodd-Frank that way gives a financial regulator authority over an industry Congress never intended to remove from state control.
The state’s Supreme Court petition contends that Congress enacted Dodd-Frank following the 2008 financial crisis to regulate financial derivatives, not to federalize sports gambling. When Congress passed the law in 2010, most sports betting remained prohibited under federal law.
“At the very least, Dodd-Frank is not nearly clear enough to transfer authority over a multi-billion-dollar sports-gaming industry to a federal regulatory agency with no gambling expertise,” New Jersey told the Supreme Court.
The state received substantial support for that position on August 28, when the U.S. Court of Appeals for the Ninth Circuit ruled against Kalshi in a separate dispute with Nevada.
Nevada gaming regulators had accused Kalshi of effectively operating an unlicensed sportsbook. Kalshi again argued that the CFTC’s federal authority prevented Nevada from enforcing its gaming laws.
A unanimous Ninth Circuit panel rejected that position as applied to Kalshi’s sports contracts.
The court concluded that the contracts were sports bets rather than “swaps” protected from state regulation by the Commodity Exchange Act. The panel said Kalshi had not shown that federal law likely preempts Nevada’s gaming requirements and allowed the state to enforce its licensing laws.
The Ninth Circuit expressly disagreed with the Third Circuit’s interpretation.
Its decision emphasized the statutory context surrounding Dodd-Frank rather than treating virtually any event with downstream economic consequences as a federally regulated swap. The court also pointed to an existing CFTC regulation addressing contracts involving gaming.
New Jersey told the Supreme Court that the disagreement is now direct and impossible to reconcile. Its petition notes that the Ninth Circuit discussed the Third Circuit ruling repeatedly while rejecting both its reasoning and result.
The difference means Kalshi’s ability to offer the same type of sports contract may depend on where a customer is located.
The Third Circuit’s ruling protects Kalshi from enforcement of New Jersey’s laws while the litigation proceeds. The Ninth Circuit has allowed Nevada to apply its gaming rules. At least Nevada, Massachusetts, Michigan and Washington have obtained court rulings restricting Kalshi’s activities.
New Jersey says litigation involving Kalshi, other prediction-market companies and the CFTC has now reached approximately 20 states. Its petition also says 44 states, hundreds of tribal governments and organizations, casinos and other parties have opposed the broad federal-preemption theory advanced by the industry.
Tribal gaming interests add another dimension to the dispute. Tribal organizations have argued in related litigation that allowing federally registered prediction markets to offer sports wagering without complying with state or tribal gaming systems could undermine the regulatory structure governing gambling on tribal lands.
The CFTC took the opposite position under the Trump administration, supporting the view that prediction-market contracts traded on federally designated exchanges fall within its jurisdiction.
The case also reaches beyond Kalshi.
A Supreme Court ruling could determine the regulatory structure for a fast-growing prediction-market industry that increasingly competes with conventional sportsbooks. A decision favoring Kalshi could limit states’ ability to apply gambling licenses, age requirements and other protections to sports contracts offered on federally regulated exchanges.
A ruling for New Jersey could require prediction-market operators offering sports contracts to comply with state gambling laws even when the underlying exchange is registered with the CFTC.
The Supreme Court’s involvement is not guaranteed. The justices receive thousands of petitions each year and accept only a small number.
A direct disagreement between federal appeals courts is one of the factors that can make Supreme Court review more likely because federal law is otherwise applied differently in different parts of the country.
New Jersey is relying heavily on that argument. Its petition describes the split between the Third and Ninth Circuits as both direct and acknowledged and asks the justices to resolve whether Congress intended Dodd-Frank to remove sports wagering from the states’ traditional regulatory authority.
For now, the competing decisions remain in place.
The Third Circuit has treated Kalshi’s sports contracts as federally regulated swaps protected from New Jersey’s gambling laws, while the Ninth Circuit has treated the same basic activity as sports gambling that Nevada may regulate.
The Supreme Court will ultimately decide whether that conflict is important enough to hear.
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