New Jersey Asks the Supreme Court to Decide Who Regulates Kalshi and the Entire Prediction Markets Industry

New Jersey is asking the US Supreme Court to settle the question that has shadowed the prediction markets industry since sports event contracts went mainstream: who gets to regulate them, the states or the federal government.

On Wednesday, New Jersey Attorney General Jennifer Davenport and the state’s interim director of the Division of Gaming Enforcement, Mary Jo Flaherty, filed a petition for a writ of certiorari with the US Supreme Court. The filing, published by the New Jersey Office of the Attorney General, seeks review of New Jersey’s enforcement action against prediction market platform Kalshi over its sporting event contracts.

At the core of the petition is a jurisdictional standoff that has produced civil cases brought by gaming authorities in at least 20 states. New Jersey wants the nation’s highest court to decide whether prediction market companies can be fully compliant with the Commodity Futures Trading Commission while simultaneously violating state gambling laws.

“Companies like Kalshi claim to offer legal sports betting in all 50 States, but they refuse to follow the gambling laws of any State,” Davenport said in a statement accompanying the petition. “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. We’re calling on the Supreme Court to resolve this issue and recognize that Congress did not silently make the sports-betting industry immune from state law.”

## The question before the court

The petition presents the Supreme Court with a precise legal question: whether the 2010 Dodd-Frank Wall Street Reform and Consumer Protection Act preempted states from regulating sports bets that occur within their jurisdictions when those bets are offered on markets registered with the CFTC.

The filing challenges an April opinion from the US Court of Appeals for the Third Circuit, in which judges ruled 2-1 against New Jersey’s gaming authorities. The appellate panel found that Kalshi had a “reasonable chance of success” in arguing that the CFTC’s Commodity Exchange Act preempted state law. New Jersey’s petition specifically pushes back on the claim that sports bets on prediction market platforms amount to “swaps” under the CFTC’s purview, arguing that federal law does not preempt state sports-gambling laws regardless.

Cointelegraph reached out to the CFTC for comment but did not receive an immediate response.

The stakes run in both directions. According to the New Jersey AG’s announcement, because federal law prohibits trading swaps off CFTC-registered markets, a victory for Kalshi would mean that all sports gambling outside such CFTC-registered markets would seemingly become illegal even where state law allows it, an outcome that would upend the state-licensed sports betting industry that expanded rapidly after a 2018 Supreme Court decision struck down the federal ban.

## Kalshi pushes back

Kalshi spokesperson Dani Lever told Cointelegraph that the company disagreed with New Jersey’s decision to appeal to the Supreme Court, arguing that the platform cannot be regulated by 50 different regulators.

“We remain confident in the lower courts’ rulings, and nothing in New Jersey’s filing today changes our view,” Lever said.

The market itself is already pricing the outcome. Polymarket, Kalshi’s largest competitor, is running an event contract on whether the US Supreme Court will take up a sports event contract case, underscoring how central the jurisdictional question has become to the entire event contracts sector.

## What happens next

Whether the Supreme Court justices agree to hear the case is unclear. The court grants certiorari in only a small fraction of petitions, typically when lower circuits have split on a question of federal law. Legal observers have been speculating for months that the justices could eventually weigh in on a prediction markets case, including one that went to the appellate court in Nevada. Whether the court chooses the Kalshi case from New Jersey, a parallel case from Nevada, or an enforcement action against a different company down the road, any eventual decision could determine which authorities hold regulatory power over prediction markets.

For the crypto industry, the implications extend well beyond sports contracts. Prediction market platforms have become one of the fastest-growing corners of the digital asset ecosystem, pulling in millions of users through election, economic, and sports event contracts. A Supreme Court ruling that federal CFTC registration shields platforms from state gaming law would hand the industry a sweeping preemptive defense. A ruling for the states would preserve the patchwork of local regimes the platforms have fought to escape.

The petition also lands at a moment of broader flux for the CFTC, which has been repositioning itself under new leadership as a friendlier regulator for digital asset markets even as state attorneys general from both parties escalate enforcement. New Jersey’s filing shows that friction is now heading for a constitutional collision, and the answer may ultimately come from nine justices rather than any regulator.

For now, Kalshi’s sports contracts remain live, the lower court rulings stand in its favor, and at least 20 states are watching to see whether the Supreme Court will take the case that could finally draw the line between Washington and the states.