New Jersey asks Supreme Court to settle Kalshi sports betting dispute
The state argues prediction market wagers are gambling, not financial swaps, seeking to resolve a split between federal circuits that threatens to bypass state regulations.
New Jersey has petitioned the US Supreme Court to determine whether sports bets on prediction markets such as Kalshi constitute gambling subject to state regulation or financial “swaps” under federal jurisdiction. Attorney General Jennifer Davenport filed the first certiorari petition on the legality of the business model, arguing that the current legal framework allows companies to bypass state gambling laws by registering with the Commodity Futures Trading Commission (CFTC).
The petition seeks to resolve a conflict between the 3rd and 9th Circuit Courts of Appeals. In April, the 3rd Circuit ruled in favour of Kalshi, classifying sports-related event contracts as “swaps” and granting the CFTC exclusive jurisdiction. Conversely, the 9th Circuit ruled approximately one week before the New Jersey petition that such bets are gambling, allowing Nevada to stop Kalshi from permitting sports wagers.
New Jersey contends that the 3rd Circuit’s decision incorrectly federalises the multi-billion-dollar sports betting industry. The state argues that if Kalshi’s interpretation is correct, state-licensed sportsbooks and brick-and-mortar casinos may have been violating federal law since the *Murphy v. NCAA* decision. The petition highlights that litigation is pending in at least 20 states, with dozens of active suits and several state gambling laws currently enjoined by federal courts.
The core legal question is whether the 2010 Dodd-Frank Wall Street Reform and Consumer Protection Act preempts state authority over sports wagers on CFTC-registered markets. New Jersey argues that the CFTC’s exclusive jurisdiction over swaps is limited to other federal agencies and does not preempt state police powers over gambling. The state maintains that Congress did not intend to federalise sports gambling regulation when resolving the 2008 financial crisis.
The Trump administration has supported Kalshi in its legal battles against states, with the CFTC filing its own lawsuits to block state regulation. Donald Trump Jr. serves as an advisor to Kalshi and Polymarket, and his venture capital firm has invested in Polymarket. Despite the administration’s support, the outcome remains uncertain, as the three 9th Circuit judges who ruled against Kalshi were all appointed by President Trump.
New Jersey currently prohibits betting on college sports but has been unable to enforce this law against Kalshi. The state’s petition emphasises that the circuit split has tremendous practical consequence, determining whether a major gaming industry can operate free from state sports-gaming laws.
