Prediction Markets Arrive on Supreme Court’s Doorstep

New Jersey has petitioned the Supreme Court to decide whether sports-event contracts should be regulated at the state or federal level. The state's Division of Gaming Enforcement and Attorney General Jennifer Davenport filed the request last Wednesday, one day before the deadline. Kalshi, described as "the first app for legal sports betting in all 50 states," claims it can offer legal sports betting without adhering to any state's gambling laws.

The petition argues that Congress shifted state authority over sports wagering to the Commodity Futures Trading Commission (CFTC) in 2008 when it directed the agency to regulate swaps following the 2008 financial crisis. The Supreme Court's potential ruling could settle a "circuit split" between the Ninth and Third Circuits. While the Ninth Circuit ruled that Nevada can enforce its gambling laws against Kalshi, the Third Circuit ruled that New Jersey's gaming regulator cannot stop the company from offering sports-event contracts in the state.

The CFTC's authority over prediction markets and whether the Commodity Exchange Act (CEA) supersedes state laws are central to the dispute. New Jersey sees the Supreme Court's decision as "urgently needed" to determine if a multi-billion-dollar gaming industry can operate without state sports-gaming laws.