The ongoing battle over the regulation of prediction markets has caught the attention of the Supreme Court. New Jersey has formally requested the court’s intervention in a legal dispute that involves numerous states and the prediction market industry, which has the backing of the Trump administration.
At the heart of this controversy is the question of whether federal commodities regulators or state gambling authorities should govern sports betting on platforms like Kalshi. While these platforms allow wagering on various topics—from executive statements during earnings calls to election outcomes—sports betting remains the most dominant, comprising over 80% of weekly trading volume.
New Jersey’s move comes in the wake of conflicting decisions from federal appeals courts. The Third Circuit Court ruled in favor of the Commodity Futures Trading Commission (CFTC) having exclusive oversight in a case involving Kalshi. Conversely, the Ninth Circuit upheld the states’ rights to regulate the industry in a Nevada-related case.
“States have always maintained primary police powers for health and safety matters, including for gambling,” the New Jersey Attorney General’s Office stated in its petition. “The Commodity Exchange Act does not grant the CFTC unprecedented authority to be the sole regulator of sports gambling, nor does it allow companies to bypass state laws by self-certifying bets on a CFTC-registered market.”
Kalshi counters that federal financial regulations supersede state laws on its nationwide platform. “Our market operates under national financial regulations and cannot be subjected to multiple state regulators,” stated Dani Lever, Kalshi spokeswoman.
Traditional state-regulated sports betting entities, like FanDuel and DraftKings, have voiced concerns that these prediction market platforms are quickly becoming formidable competitors, potentially bypassing state taxation.
If the Supreme Court decides to engage with New Jersey’s petition, it could schedule oral arguments in the fall, with a decision anticipated by the next summer.