New Jersey has asked the U.S. Supreme Court to settle the legal dispute over whether sports event contracts offered by prediction markets are federally regulated swaps under federal commodities law or wagers subject to state gambling regulations.
The petition filed Wednesday follows conflicting decisions by the U.S. Court of Appeals for the Third and Ninth circuits and gives the nine justices an opportunity to determine the future of sports event contracts.
The state asked the Supreme Court to overturn a 2-1 decision in April by the Philadelphia-based Third Circuit in Kalshi’s favor. That ruling found that the Commodity Futures Trading Commission (CFTC) has exclusive jurisdiction over the sports event contracts that preempted New Jersey’s gaming laws.
New Jersey’s filing comes less than a week after the Ninth Circuit ruled against Kalshi in the Nevada case. The 3-0 ruling held that Kalshi’s sports event contracts aren’t swaps under the Commodity Exchange Act (CEA) are therefore subject to state gaming regulations.
“Companies like Kalshi claim to offer legal sports betting in all 50 states, but they refuse to follow the gambling laws of any state,” New Jersey Attorney General Jennifer Davenport said in a statement. “These companies have no right to offer their sports bets without following state law, which is why dozens of states across the ideological spectrum have opposed them.”
In a 47-page filing, Davenport wrote that not only are the circuits divided on whether states can regulate sports bets occurring on CFTC-registered markets, “but the practical and jurisprudential stakes could hardly be higher.”
“The issue is whether Congress federalized the multi-billion-dollar sports gaming industry at the expense of every state’s sports gambling law in a 2010 Wall Street reform bill,” known as the Dodd-Frank Act, wrote Davenport. “It implicates an explosion of litigation impacting states, as companies such as Kalshi offer sports bets nationwide based on a business model of noncompliance with state statutes.”
Davenport noted that the current situation also has serious implications for tribes and casinos, which have long offered sports bets through state-licensed sportsbooks. New Jersey’s filing urges the Supreme Court to resolve the “irreconcilable” appellate split decisions.
“The practical importance of this dispute goes to the heart of the states’ police power, posting a fundamental threat to the over 150-year tradition of state gaming regulation,” Davenport added.
Dani Lever, a Kalshi spokeswoman, said the company disagrees with New Jersey’s filing.
“Kalshi is an open, nationwide, financial exchange,” Lever said in a statement emailed to CDC Gaming Wednesday. “It cannot be regulated by 50 different regulators. Both the Third Circuit and the District of New Jersey side with Kalshi, because the CFTC’s exclusive jurisdiction prompt state law.”
Lever added that that while New Jersey points to last week’s decision in the Ninth Circuit, “that decision agreed with that key principle.
“We remain confident in the lower courts’ rulings and nothing in New Jersey’s filing today changes our view,” Lever said.
The Supreme Court typically grants only 1% of all cert petitions filed each year. Appearing on the Indian Gaming Association’s New Normal webinar on Wednesday, gaming analyst Steven Ruddock put the chance at only 10% that the Supreme Court doesn’t eventually take the case.
“Not only is this an issue of great policy importance, but the practical economic impacts are overwhelming,” Davenport wrote. “Whether states or Kalshi are correct about this legal issue will decide who oversees a multi-billion-dollar industry.”
In 2025, sports betting generated $16.89 billion in revenue for states, not including sportsbooks in tribal casinos, according to the American Gaming Association. Moreover, Davenport wrote, the case raises serious issues for the operation of other laws, such as the Indian Gaming Regulatory Act (IGRA) and the Wire Act.
IGRA gives tribes the “exclusive right to regulate gaming activity on Indian lands” so long as the state where those lands are located permits gaming. The Wire Act makes it a crime to use interstate wire communication facilities, including the internet, to facilitate bets on “any sporting event,” except if the wagers are legal in the sending and receiving states.
Currently, there are two additional appeals court rulings that are still pending,
The U.S. Court of Appeals for the Fourth Circuit is weighing whether Maryland can enforce state gambling laws against Kalshi. The appeal was heard in May. Meanwhile, a three-judge panel of the U.S. Court of Appeals heard oral arguments in July, in consolidated legal challenges involving efforts by Ohio and Tennessee to regulate prediction markets under state gaming laws.
Nevada offers clear position on prediction markets
Mike Dreitzer, chairman of the Nevada Gaming Control Board (NGCB), made it clear that the state’s position on the legality of prediction markets has been consistent.
“This is about proper and fair regulation in the state of Nevada, steeped in decades of legal precedent,” Dreitzer said at the outset of Wednesday’s Control Board hearing. “It’s about telling the truth and protecting consumers. Last week, the Ninth Circuit rejected the idea that a product that is, in substance, a sports wager can avoid state gaming laws simply by being called a sports event contract.”
Dreitzer stated that sports event contracts are not so-called swaps.
“The simple fact is, anytime you risk money on the uncertain outcome of a sporting event, that’s a bet. End of story,” Dreitzer said. “Nevada is best positioned and fully empowered to regulate any and all gambling activity within our state. Importantly, the court also noted the (CFTC) is not a national gambling regulator.”
Dreitzer, who held executive positions with gaming companies before being named to the Control Board, admitted that regulation has an obligation to keep pace with business and technology. As new products and technologies emerge quickly, the NGCB chair noted that regulators need the expertise, resources, and flexibility to understand, evaluate, and approve them without lowering the standards that protect the public.
“Nevada supports innovation. We want new products here, including prediction markets,” Dreitzer said. “Any notion that we’re unable, incapable, or unwilling to properly regulate prediction products is a fiction created by those who seek to preserve an environment of unfairness and disadvantage in the interest of profit.
“Let me be clear: Anyone offering any product in Nevada must come through the front door,” Dreitzer concluded.
