New Jersey has petitioned the U.S. Supreme Court to settle a jurisdictional dispute over prediction markets and sports event contracts, asking the court to clarify whether federal commodities law preempts state gambling regulations.
The petition follows an April decision by the Third U.S. Circuit Court of Appeals, which ruled that Kalshi's event contracts fall under the Commodity Exchange Act and that federal law overrides New Jersey gambling rules. Attorney General Jennifer Davenport argued that prediction market firms should not circumvent state sports-betting laws simply by operating on a Commodity Futures Trading Commission-registered exchange.
New Jersey contends that Congress did not strip states of authority over sports wagering when it passed the Dodd-Frank Act in 2010, and that sports event contracts amount to sports betting subject to state oversight.
Circuit Split Emerges
The legal landscape became more complex following a recent Ninth U.S. Circuit Court of Appeals ruling. That court determined that the Commodity Exchange Act likely does not preempt Nevada rules covering sports-related event contracts, conflicting with the Third Circuit's decision.
The Ninth Circuit also rejected requests from Kalshi and Crypto.com for relief against the Nevada Gaming Control Board, deepening the split between federal appeals courts over how sports contracts should be classified and regulated.
Industry Response
Kalshi maintains it operates as a nationwide financial exchange and argues the CFTC has exclusive jurisdiction. The company contends it cannot operate under 50 separate regulatory systems.
Forty-four state attorneys general have supported New Jersey's position, stating that sports event contracts should remain under state oversight.
Supreme Court review remains uncertain. The justices receive numerous petitions each term and may await additional lower court rulings before accepting the case.
