New Jersey has petitioned the US Supreme Court to rule on whether sports prediction markets are exempt from state gambling laws. The state is appealing the Third Circuit's May ruling in favor of Kalshi. Last week the Ninth Circuit ruled against Kalshi, creating a circuit split.
The Supreme Court requires at least four of nine justices to agree to hear a case. Polymarket puts the probability of the case being accepted this year at 46%. The court hears around 100 cases annually—less than 5% of all petitions. Former CFTC regulator Carl Kennedy noted the court may wait for a more procedurally developed case.
The Third Circuit ruled 2:1 for Kalshi. The dissenting judge said the platform operates gambling and must comply with state laws. The Ninth Circuit ruled unanimously that Kalshi's contracts constitute sports betting. The decision cited CFTC rules allowing the agency to ban gambling-related contracts if they conflict with public interest.
New Jersey's petition argues that "nothing in the law gives the CFTC unprecedented authority to become the sole regulator of sports betting in the country." Kalshi spokesperson Dani Lever countered that the platform cannot be regulated by 50 different regulators and that CFTC jurisdiction takes precedence over state law.
Circa Sports CEO Derek Stevens said the opposition to Kalshi is too strong: attorneys general from 44 states are involved in litigation against prediction markets. He pointed to risks for state budgets—New York could lose over $1.5 billion in tax revenue, Illinois also significant amounts. Attorney Daniel Wallach noted the Ninth Circuit ruling complicates Kalshi's position: judges ruled the platform's sports markets do not meet the swap criteria under the Commodity Exchange Act.
