New Jersey has formally asked the U.S. Supreme Court to decide whether federally regulated prediction markets can offer sports contracts without complying with state gambling laws. On Sept. 2, New Jersey Attorney General Jennifer Davenport filed a 332-page petition for a writ of certiorari seeking review of a Third Circuit ruling that favored Kalshi.
The dispute began when New Jersey sent Kalshi a cease-and-desist letter alleging violations of state gambling law. Kalshi sued, and in April the Third Circuit upheld preliminary relief preventing New Jersey from enforcing its rules against Kalshi's sports event contracts. The appellate court found Kalshi had a reasonable chance of proving those contracts qualify as swaps under the Commodity Exchange Act, which could place them under exclusive CFTC jurisdiction.
New Jersey argues that Dodd-Frank did not clearly authorize CFTC-registered markets to offer sports betting nationwide without state oversight. The petition invokes the major-questions doctrine, saying Congress would have needed to speak clearly before allowing federal derivatives law to displace traditional state authority over gambling. Kalshi maintains it is an open, nationwide financial exchange and cannot be regulated by 50 different regulators.
The Supreme Court filing highlights a conflicting Ninth Circuit decision that allowed Nevada to enforce its gaming laws against prediction market sports contracts. That court found sports contracts were likely wagers rather than swaps. More than 20 lawsuits and cease-and-desist actions have now spread across the U.S., including a New York case seeking at least $36 billion in penalties. Kalshi has sold roughly $1.12 billion in equity since April and was recently valued at $22 billion, while rival Polymarket is reportedly seeking funding at a $21 billion valuation.
