New Jersey Petitions Supreme Court to Block Kalshi From Offering Unregulated Sports Bets

The state of New Jersey has formally petitioned the U.S. Supreme Court to determine whether local gaming regulators retain authority over sports wagers placed on federally registered prediction markets like Kalshi. The legal filing comes after conflicting decisions from two federal appellate courts created a sharp circuit split over whether sports event contracts constitute financial swaps or traditional gambling, as first reported by Ars Technica. In a statement accompanying the petition, New Jersey Attorney General Jennifer Davenport contended that operators in the prediction sector are improperly circumventing state laws, noting that firms such as Kalshi assert they can offer legal sports betting nationwide without complying with individual state gambling statutes.

The jurisdictional fight intensified following an April ruling by the 3rd U.S. Circuit Court of Appeals, which prohibited New Jersey from enforcing its gaming statutes against Kalshi. The 3rd Circuit held that event contracts tied to athletic outcomes fall within the statutory definition of swaps, placing them under the exclusive oversight of the U.S. Commodity Futures Trading Commission (CFTC). That decision effectively neutralized New Jersey's regulatory framework, which includes a complete ban on gambling tied to collegiate sports. In its Supreme Court brief, New Jersey argued the appellate ruling was deeply flawed, warning that allowing prediction exchanges to federalize sports betting threatens state gaming laws nationwide.

New Jersey's petition arrived roughly a week after a contrasting ruling from the 9th U.S. Circuit Court of Appeals, which unanimously held that Nevada state authorities could stop Kalshi from offering sports event contracts within its jurisdiction. The 9th Circuit panel rejected the argument that labeling sports wagers as swaps removes them from state oversight. Writing for the court, Circuit Judge Ryan Nelson stated that placing sports wagers remains gambling regardless of the terminology used. Circuit Judge Kenneth Lee separately noted that routine athletic results do not carry the structural financial or economic consequences intended by federal swap statutes, observing that the outcome of a single regular-season baseball game rarely generates the commercial impact expected of a financial derivative.

In its petition to the High Court, New Jersey emphasized that the federal statutory framework governing swaps was never intended to strip states of their traditional police powers over gambling. The dispute hinges on provisions of the 2010 Dodd-Frank Wall Street Reform and Consumer Protection Act, which amended the Commodity Exchange Act to grant the CFTC exclusive jurisdiction over swaps tied to financial or economic contingencies. New Jersey's brief pointed out that defining sports bets as swaps creates a legal contradiction for the wider gaming sector: because Dodd-Frank prohibits off-exchange swaps, accepting Kalshi's logic would imply that traditional state-licensed sportsbooks at physical casinos have been operating in violation of federal commodities laws for years.

The legal challenge marks the first certiorari petition submitted to the Supreme Court addressing whether prediction exchanges can offer CFTC self-certified sports contracts without state licensing. Disclosures from Attorney General Davenport's office indicate that active litigation over prediction market boundaries has spread across at least 20 states, resulting in multiple federal court injunctions that currently prevent state officials from applying local gaming laws. New Jersey urged the High Court to intervene promptly to resolve judicial division, protect state tax revenues, and clarify whether Congress intended to dismantle long-standing federal-state gaming frameworks when reforming financial regulatory policy after the 2008 financial crisis.

New Jersey also challenged the breadth of the CFTC's preemption authority under federal law. The state argued that even if athletic event contracts were deemed to be financial swaps, the CFTC's exclusive jurisdiction was enacted to prevent jurisdictional overlap among federal agencies, rather than to override historical state police powers over gambling. The petition highlighted that Congress has repeatedly recognized and preserved state gaming regulation across decades of federal legislation, making it implausible that lawmakers intended to quietly erase state sports betting laws through commodities market amendments.

The high-stakes legal battles coincide with broader regulatory and political involvement in the prediction market industry. The CFTC has launched lawsuits against state gaming boards to insulate federal exchanges from local enforcement, aligning with legal arguments supported by the Trump administration. Furthermore, Donald Trump Jr. serves as an advisor to Kalshi and rival platform Polymarket, with his venture capital firm holding an equity position in Polymarket. Despite that political backing, the unanimous 9th Circuit decision siding against Kalshi was authored entirely by judicial appointees from the Trump administration, highlighting the complex legal fractures surrounding commodities regulation and sports gaming.