New Jersey has become the first state to ask the US Supreme Court to decide who regulates sports-related prediction contracts. The state filed a petition for certiorari on 2 September. The outcome could determine whether Kalshi and its rivals operate as licensed gambling businesses or as federally supervised financial platforms. The filing follows a direct conflict between two federal appeals courts. It also lands at a moment when licensed sportsbooks are increasingly vocal about competing against unregulated rivals.
What happened
New Jersey’s Attorney General’s Office filed its petition after the 9th US Circuit Court of Appeals ruled on Friday that sports-related event contracts are not swaps regulated by the CFTC. That decision rejected Kalshi and Crypto.com’s appeal for injunctive relief against the Nevada Gaming Control Board. It directly contradicts the 3rd Circuit’s July ruling, which found that the Commodity Futures Trading Commission holds the exclusive right to oversee the prediction market sector in a case Kalshi brought against New Jersey.
Attorney General Jennifer Davenport and Solicitor General Jeremy Feigenbaum lodged a 332-page petition for a writ of certiorari in Flaherty v. KalshiEX, LLC. The state’s filing frames the dispute squarely. The question presented asks “Whether Dodd-Frank preempts States from regulating sports bets occurring within their jurisdictions when those bets are offered on CFTC-registered markets.” New Jersey argues that prediction market providers “have no right to offer their sports bets without following state law.” The petition describes the Third Circuit’s decision as “profoundly important” and “profoundly wrong.”
Kalshi has signalled it will keep fighting the adverse Ninth Circuit outcome. A company spokesperson told The Hill that the firm will seek “further review”, and Kalshi maintains that CFTC regulations as written do not prohibit its sports contracts. Chief executive Tarek Mansour also used a media interview to push back on how the Ninth Circuit judges characterised his business. The pressure is not confined to two circuits. Michigan Attorney General Dana Nessel has secured a preliminary injunction against Kalshi, forcing the company to stop offering sports-related contracts in that state.
Why it matters
The circuit split creates genuine uncertainty for every stakeholder in regulated sports betting. If the Supreme Court sides with the states, prediction market operators would need the same licences as incumbent sportsbooks. They would also pay the same taxes and follow the same advertising and consumer-protection rules. Operators such as DraftKings and Flutter have long argued that the current playing field tilts against them. The market noticed the competitive angle. Shares in DraftKings and FanDuel’s parent company Flutter Entertainment both rose by more than 5% after New Jersey filed its petition.
For suppliers and affiliates, the outcome will shape which platforms can legally market sports wagering products in each state, and under what compliance regime. A ruling against Kalshi would likely curb the rapid spread of prediction market promotion into channels reserved for licensed sportsbook brands. A win for the company would force state regulators and licensed operators to compete against a federally supervised product that carries a different tax and compliance burden.
The bigger picture
The Supreme Court petition arrives amid a broader wave of state-level pushback against prediction markets. There are currently 20 states locked in legal battles with prediction platforms. In July, 43 other states signed a letter disagreeing with the CFTC’s claim of exclusive regulatory jurisdiction. Analysts do not expect a quick resolution. Bank of America noted that the split between the 3rd and 9th circuit rulings gives the Supreme Court an opportunity to get involved, though legal experts think the Court may wait until next year given pending cases in other circuits.
The case is playing out against a backdrop of continued growth for prediction market operators. Rivals including Novig and Underdog report strong momentum in parlay-style “combo” products even as the legal ground beneath the sector remains unsettled. Kalshi itself continues to attract investor confidence despite the litigation, with recent funding rounds valuing the company in the billions of dollars. The industry has spent years building compliance infrastructure around state-by-state licensing. Whether federal commodities registration can bypass that model is now one of the most consequential regulatory questions of the current cycle.
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Sources
- Gambling News – New Jersey’s Prediction Market Dispute May Head to the Supreme Court
- Gambling News – Kalshi CEO Comments on Recent Ninth Circuit Ruling
- Gambling News – Michigan Scores Major Victory Against Prediction Platforms
- CasinoBeats – New Jersey Petitions Supreme Court to Hear Sports Prediction Market Case Following Circuit Split
- CasinoBeats – How Kalshi Can Use Ninth Circuit Ruling to Help Its Cause, According to Law Professor Melinda Roth
- CNBC – New Jersey Asks the Supreme Court to Take on Prediction Markets
- NPR – New Jersey Asks Supreme Court to Resolve Prediction Market Fight
- CoinDesk – New Jersey Becomes First State to Ask Supreme Court to Weigh in on Prediction Markets
- PYMNTS – Ninth Circuit Hands States Victory in Prediction Market Jurisdiction Fight
- The Hill – Appeals Court Ruling Affirms State Power to Oversee Prediction Markets as Gambling
- iGaming Business – Prediction Market Roundup: Nevada’s Ninth Circuit Win Over Kalshi Sets the Stage for Potential SCOTUS Review