New Jersey Is Taking the Kalshi Fight to the Supreme Court
Key Points
- The September 2 petition is the first certiorari petition asking the Supreme Court to review the legality of the sports event contract business model used by Kalshi.
- The Third Circuit and Ninth Circuit have now reached opposing conclusions over whether Kalshi’s sports contracts qualify as swaps protected from state gambling enforcement under federal commodities law.
- Litigation over the regulatory status of sports event contracts now involves at least 20 states, according to the New Jersey Attorney General’s Office.
New Jersey Asks Supreme Court to Rule on Kalshi Sports Prediction Market Regulation
On September 2, New Jersey filed a petition for a writ of certiorari asking the Supreme Court to decide whether federal commodities law prevents states from applying their gambling laws to sports contracts offered through federally regulated prediction markets.
The petition targets the Third Circuit’s April decision in KalshiEX v. Flaherty, which left a preliminary injunction in place preventing New Jersey from enforcing its gambling laws against Kalshi’s sports contracts.
The state says the question has outgrown its original dispute with Kalshi. According to Attorney General Jennifer Davenport’s office, related litigation has spread across at least 20 states, with dozens of active cases and some state gambling laws already blocked by federal courts. The office describes New Jersey’s filing as the first Supreme Court cert petition squarely addressing the legality of this sports event contract model.
Davenport framed the case as a fight over whether registering with the Commodity Futures Trading Commission can displace state authority over sports wagering.
“Companies like Kalshi claim to offer legal sports betting in all 50 States,” Davenport said in a statement announcing the petition, while arguing that those companies still must comply with state gambling laws.
The Third Circuit gave Kalshi its strongest federal preemption win
The Third Circuit ruled 2-1 on April 6 that Kalshi had shown a reasonable chance of succeeding on its argument that the Commodity Exchange Act preempts New Jersey gambling law. The majority concluded that Kalshi’s sports event contracts fit within the statute’s definition of swaps because the outcomes are associated with financial, economic or commercial consequences and are traded on a CFTC licensed designated contract market.
That conclusion placed the contracts inside an area where the Commodity Exchange Act gives the CFTC exclusive jurisdiction. As a result, the appeals court affirmed the preliminary injunction preventing New Jersey regulators from taking enforcement action against Kalshi while the litigation proceeds.
This procedural posture is important. The Third Circuit was reviewing preliminary relief rather than entering a final judgment after a full trial.
Even so, its statutory interpretation is now directly at odds with another federal appeals court, giving New Jersey a substantially stronger reason to ask the Supreme Court to intervene.
The Ninth Circuit gave Nevada the opposite answer
That conflict became explicit on August 28, when the Ninth Circuit ruled against Kalshi in its dispute with Nevada. The unanimous panel held that Kalshi had not shown the Commodity Exchange Act was likely to preempt Nevada gaming law and concluded that the sports contracts at issue did not qualify as swaps under the relevant provision because they were sports bets.
The Ninth Circuit also relied on the CFTC’s existing Regulation 40.11, which addresses contracts involving activities including gaming. That part of the legal landscape remains unsettled because the CFTC proposed amendments to Regulation 40.11 in June, including a new framework for determining when event contracts involving gaming or other enumerated activities are contrary to the public interest.
Kalshi argues the two decisions are not as incompatible as New Jersey claims. Spokesperson Dani Lever said in an emailed statement that “Kalshi is an open, nationwide financial exchange” and cannot operate under 50 different regulators, while maintaining that both appellate courts recognize the CFTC’s exclusive jurisdiction over genuine swaps. Kalshi says the Ninth Circuit diverged primarily over how sports contracts fit within the statute and the CFTC’s current regulation.
The commercial stakes for Kalshi are substantial. The Ninth Circuit said more than 90% of Kalshi’s trades in 2025 were sports related and that those trades accounted for 95% of its revenue. A Supreme Court ruling against the company’s legal theory would therefore reach directly into the product category that has become the center of its business.
Why This Matters For Bettors
For bettors, the practical question is whether sports contracts offered through federally regulated exchanges can continue operating under one national framework or become subject to the gambling rules of individual states. A victory for New Jersey would give state regulators much stronger legal footing to apply restrictions involving market eligibility, prohibited wagers, licensing, consumer protections and other rules that already govern conventional betting operators.
That could produce noticeably different products from one state to another. Contracts permitted in one jurisdiction could be restricted in another, and platforms might have to respond with geolocation controls, narrower market menus or other state-specific changes. Reducing the number of participants able to trade certain contracts could also affect liquidity and pricing, particularly in smaller markets.
The broader competitive issue involves the relationship between prediction markets and regulated sportsbooks. State licensed operators have built their businesses around individual gaming regimes, while Kalshi’s model depends on federal regulation allowing one exchange to serve customers nationally. The Supreme Court now has an opportunity to define whether those two systems can continue operating under fundamentally different regulatory structures when they offer products tied to the same sporting events.
A Kalshi victory would strengthen the federal model and make it considerably harder for states to use ordinary gambling law against sports contracts traded on CFTC regulated exchanges. A New Jersey victory would shift leverage back toward state gaming regulators and could force prediction market operators to reconsider how, and potentially where, they offer sports products.
What Happens Next
Kalshi will have an opportunity to oppose New Jersey’s petition before the justices decide whether to grant review. If the Court declines the case, the split between the Third and Ninth Circuits remains unresolved and litigation in other jurisdictions will continue carrying greater significance.
The CFTC’s pending Regulation 40.11 rulemaking adds another moving piece. Any final rule could alter some of the regulatory arguments surrounding sports contracts, but the larger statutory question raised by New Jersey - whether Congress displaced state authority over sports gambling through the Commodity Exchange Act - would remain central to the nationwide fight.
Marcus has spent over 20 years navigating the legal side of online betting - from his early days consulting for offshore operators to helping licensed U.S. sportsbooks launch in regulated markets. He’s worked with compliance teams, reviewed licensing frameworks in 15+ states, and advised on some of the biggest regulatory shifts since PASPA was repealed.
At BettingScanner, Marcus serves as the voice of reason - translating legalese into plain English and helping bettors understand what’s legal, what’s risky, and where the gray areas live. If you’re ever unsure about the rules, Marcus is your man - as he probably helped write them.
