New Jersey formally filed a petition for a writ of certiorari with the US Supreme Court on September 2 to review an appeals court ruling favoring Kalshi. At the core of this legal move is a fundamental question: whether the Dodd-Frank Act preempts states from regulating sports contracts offered by Commodity Futures Trading Commission (CFTC)-registered prediction markets.
One Issue, Two Court Interpretations
New Jersey’s primary argument centers on a contradiction between federal appeals court rulings. Last April, the Third Circuit sided with Kalshi, ruling that sports contracts likely qualify as swap instruments under the Commodity Exchange Act. That decision granted the CFTC exclusive jurisdiction that could preempt state laws.
However, the Ninth Circuit took an entirely opposing stance. The court determined that sports contracts fall under the category of gaming rather than swaps, allowing states like Nevada to continue enforcing their local gambling laws on prediction market operations.
According to the petition, this circuit split compels the Supreme Court to intervene. New Jersey argued that the US Congress never authorized federally registered exchanges to offer nationwide sports betting without complying with local gambling regulations in each jurisdiction. Invoking the major-questions doctrine, the state contended that such a major shift in federal-state authority requires explicit congressional authorization.
Lawsuits Reach Tens of Billions of Dollars
State-level pressure against prediction market operators goes beyond legal arguments. By mid-August, more than 20 lawsuits and cease-and-desist orders had been issued against various operators across the US.
New York took the most aggressive step by suing Kalshi, demanding at least $36 billion in penalties and restitution. Elsewhere, Arizona has filed a series of criminal charges. These local enforcement actions have also found traction in the courts. In August, a federal court rejected Coinbase’s request to block Michigan regulators from cracking down on sports prediction markets.
Who Holds Ultimate Control?
Kalshi stated it remains confident in the legal rulings favoring its stance so far. The company also noted that the underlying regulation at the center of the Ninth Circuit dispute is currently undergoing revision.
If the Supreme Court grants New Jersey’s petition and hears the case, its final ruling will draw a permanent line between federal regulatory authority and state-level powers. Until that boundary is settled, prediction market operators must continue navigating a fragmented patchwork of state gambling laws.
Reported by crypto.news.
Disclaimer: This article is for informational and educational purposes only, not financial advice. Cryptocurrency assets are highly volatile and carry significant risk. Always do your own research (DYOR) and never invest more than you can afford to lose.
