New Jersey has petitioned the U.S. Supreme Court to decide who regulates prediction markets: the states or the federal government. The filing follows conflicting rulings by two federal appeals courts on sports-related event contracts.
In April the 3rd U.S. Circuit Court of Appeals held that event contracts are derivatives, regulated at the federal level by the Commodity Futures Trading Commission. The 9th U.S. Circuit Court of Appeals came to the opposite conclusion and denied Kalshi and Crypto.com injunctive relief against the Nevada Gaming Control Board. Its ruling said Kalshi's sports event contracts 'have the hallmarks of sports betting'. That split is what may push the Supreme Court to say which regulator owns prediction markets.
New Jersey Attorney General Jennifer Davenport said: 'We are asking the Supreme Court to resolve this and recognize that Congress did not silently exempt the sports betting industry from state laws.' The petition argues that companies claim state sports betting laws 'fall away' when wagers are offered on a CFTC-registered venue, and calls the Third Circuit ruling 'exceptionally important and equally exceptionally wrong'.
Kalshi rejects that reading. 'Kalshi is an open, nationwide financial exchange. It cannot be regulated by 50 different regulators,' spokesperson Dani Lever said. Both the Third Circuit and the New Jersey district court sided with Kalshi, she said, because CFTC exclusive jurisdiction preempts state law. A bipartisan coalition of 44 state attorneys general counters that sports event contracts are sports betting and belong under state rules. Bank of America notes the Supreme Court may not take the case before next year, with related disputes still moving through other federal circuits. For operators, the outcome decides where prediction market rules settle, and with them state tax receipts and consumer protection. Leading platforms in the segment process billions of dollars in weekly trading volume.
