Key Points
- New Jersey petitions the Supreme Court to resolve whether states retain regulatory power over Kalshi’s sports prediction platforms
- Two separate federal appeals courts have delivered contradictory verdicts on identical legal questions
- The state contends Kalshi operates unlicensed sports wagering in violation of state statutes
- The $22 billion company maintains its offerings fall under CFTC jurisdiction as federally regulated swap contracts
- The high court’s decision would establish precedent impacting prediction market platforms nationwide
New Jersey has escalated its legal fight against Kalshi by formally requesting Supreme Court intervention to determine whether state governments possess authority to oversee sports prediction markets operated by the platform.
The petition, submitted September 2, challenges an April decision from the Third US Circuit Court of Appeals that favored Kalshi. That appellate panel determined the US Commodity Futures Trading Commission holds sole jurisdiction over the platform’s sports-related contracts.
New Jersey Attorney General Jennifer Davenport maintains these platforms lack authorization to facilitate sports wagering without adhering to state regulations. She emphasized that numerous states from diverse political backgrounds have challenged Kalshi’s interpretation.
Conflicting Federal Appellate Decisions
The petition’s submission follows significant developments. On August 28, the Ninth Circuit Court of Appeals delivered a ruling opposing Kalshi in litigation involving Nevada. That panel determined Kalshi’s sports-based contracts constitute sports gambling rather than federally supervised swaps, affirming Nevada’s right to enforce its gaming regulations.
This verdict stands in sharp contrast to the Third Circuit’s earlier determination. When separate federal appellate courts issue conflicting interpretations on identical legal matters, the Supreme Court typically demonstrates greater willingness to grant review.
Multiple states including Nevada, Massachusetts, Michigan and Washington have already secured judicial orders limiting Kalshi’s business activities.
Central Issues in Dispute
Kalshi’s position maintains its offerings constitute event contracts subject to CFTC oversight under the Commodity Exchange Act. The CFTC during the Trump administration has endorsed this interpretation, initiating litigation against states attempting to apply gambling statutes to the platform.
New Jersey argues Congress never envisioned transferring sports betting industry control to federal agencies when enacting the Dodd-Frank Act following the 2008 financial collapse. The state asserts the legislation lacks sufficient clarity to eliminate state jurisdiction over this multi-billion dollar sector.
Currently valued at $22 billion, Kalshi has pursued aggressive expansion throughout the prediction markets sector.
The litigation bears the official designation KalshiEX v. Flaherty. The Supreme Court has not yet indicated whether it will grant certiorari.
Should the court accept the case, its determination would extend beyond Kalshi to influence the broader prediction markets industry, which confronts legal challenges and operational restrictions across numerous jurisdictions. Standard procedure involves docketing the petition, potentially requesting respondent briefing from Kalshi, and determining whether to grant full review.
Oral arguments have not been scheduled.
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