New Jersey has formally asked the U.S. Supreme Court to decide whether the Commodity Futures Trading Commission’s authority over event contracts prevents states from enforcing their own gambling laws against Kalshi.
The petition comes days after the United States Court of Appeals for the Ninth Circuit directly rejected the Third Circuit’s Kalshi-friendly ruling, giving the Supreme Court a clean conflict between federal appeals courts.
“Companies like Kalshi claim to offer legal sports betting in all 50 States, but they refuse to follow the gambling laws of any State,” NJ Atty. Gen. Jennifer Davenport said in a release. “These companies have no right to offer their sports bets without following state law, which is why dozens of States across the ideological spectrum have opposed them. States have long adopted careful laws to regulate gambling, including to prevent compulsive gambling, gambling by minors, and insider trading on sports games. We’re calling on the Supreme Court to resolve this issue and recognize that Congress did not silently make the sports-betting industry immune from state law.”
The case, KalshiEX v. Flaherty, could become the defining prediction markets case. New Jersey argues Kalshi’s sports contracts are unlicensed betting products subject to state gaming law. Kalshi and the CFTC argue the contracts are federally regulated swaps beyond state control.
The Third Circuit ruling
The Third Circuit ruled in April that Kalshi’s sports event contracts are swaps traded on a CFTC-registered designated contract market, finding the Commodity Exchange Act likely preempted New Jersey from applying its gambling laws to the products.
That ruling upheld a preliminary injunction allowing Kalshi to continue operating in the state without a New Jersey sports betting license.
New Jersey did not seek rehearing before the full Third Circuit. Instead, it asked the Supreme Court for extra time to prepare a certiorari petition, with Justice Samuel Alito granting extensions that pushed the filing deadline to Sept. 3.
Ninth Circuit split
The timing now matters much more than it did when New Jersey first sought an extension. On Aug. 28, the Ninth Circuit ruled for Nevada and held that Kalshi’s sports contracts are sports bets, not swaps, allowing Nevada to apply its gaming laws.
The Ninth Circuit rejected the Third Circuit’s reading of the Commodity Exchange Act and concluded that treating game outcomes as swaps would effectively federalize sports betting without clear direction from Congress. The panel also held that the CFTC’s existing Rule 40.11 bars CFTC-registered exchanges from listing contracts involving gaming.
That creates an explicit appellate conflict between the Third and Ninth circuits.
What comes next for NJ, Kalshi
The Supreme Court is not required to accept New Jersey’s petition. But a direct circuit split on a major federal-preemption question substantially increases the odds that the justices will intervene.
The answer would affect far more than New Jersey. Kalshi and other prediction markets operators face enforcement actions, lawsuits or legislative restrictions in states across the country, while the CFTC has sued states to defend what it calls its exclusive jurisdiction over federally registered event-contract exchanges.l
For now, the Supreme Court has only been asked to take the case. Its next steps will be to docket the petition, request a response from Kalshi if it wants one, and decide whether to grant certiorari.
