New Jersey asks Supreme Court to decide who regulates Kalshi sports contracts

New Jersey asked the Supreme Court to decide whether states can enforce gambling laws against sports-event contracts traded on Kalshi and similar prediction markets. The petition seeks review of an April Third Circuit ruling that New Jersey says wrongly treated the Commodity Futures Trading Commission as the exclusive regulator of those contracts.

The filing, brought by Interim Director Mary Jo Flaherty and Attorney General Jennifer Davenport against KalshiEX, asks whether the 2010 Dodd-Frank Act preempted states from regulating sports bets offered on markets registered with the CFTC. New Jersey argues that Congress gave the agency authority over swaps after the 2008 financial crisis, but did not give it exclusive power to displace state gambling laws.

The state says gambling has long been regulated by the states and cites Murphy v. NCAA for the proposition that each state remains free to act on its own. It also says its Sports Wagering Act was designed to allow betting under tight limits meant to deter insider trading, gambling by minors and compulsive gambling. In a statement, Davenport said companies have no right to offer sports bets without following state law.

The Third Circuit’s April decision arose from Kalshi’s attempt to block New Jersey regulators from enforcing a cease-and-desist letter over sports-related event contracts. The appeals court affirmed a preliminary injunction for Kalshi and held that the Commodity Exchange Act preempts state law as applied to sports contracts traded on a CFTC-licensed designated contract market. It described Kalshi’s contracts as derivatives tied to events with multiple possible outcomes, a payment schedule and an expiration date, with prices moving on market expectations.

The court also said the CFTC certified Kalshi’s exchange as a designated contract market in 2020, and that Kalshi began offering sports-related event contracts in 2025. It noted that the CFTC has not found those contracts contrary to the public interest.

As reported last week, the Ninth Circuit split from the Third Circuit in a Nevada case, saying states, not the federal government, should regulate prediction markets. New Jersey’s petition says that conflict has already dragged at least 20 states into litigation.

The dispute matters because sports bets are the most popular category on prediction-market platforms, accounting for 80% or more of weekly trading volume, according to NPR. Kalshi says federal rules for financial markets govern its exchange and that it cannot be regulated by 50 different state authorities. If the Supreme Court accepts review, arguments could be scheduled this fall and a decision could come by next summer.