Kalshi’s Sports Prediction Market Fight Could Be Headed to the Supreme Court
Updated September 3, 2026
Updated September 3, 2026
New Jersey has asked the U.S. Supreme Court to step into the growing legal battle over sports prediction markets. Conflicting federal appeals court rulings involving Kalshi could ultimately determine whether platforms operating under CFTC oversight must also comply with state sports betting laws.
The legal battle over sports prediction markets has reached the doorstep of the U.S. Supreme Court.
New Jersey filed a petition on September 2 asking the country's highest court to review a ruling that prevented the state from applying its sports betting laws to Kalshi.
The filing does not mean the Supreme Court has agreed to hear the case. But it comes just days after a separate federal appeals court reached essentially the opposite conclusion in Nevada, creating a major legal divide over who has the authority to regulate sports prediction markets.
At the center of the dispute is a question that could shape the future of prediction markets in the United States: does federal regulation through the Commodity Futures Trading Commission override state gambling laws when prediction markets offer contracts on sports?
New Jersey's dispute with Kalshi began after state regulators ordered the prediction market to stop offering sports-related event contracts without complying with New Jersey gambling laws.
Kalshi challenged the order in federal court.
The company operates a CFTC-regulated Designated Contract Market and argues that its event contracts fall under the federal Commodity Exchange Act. On that basis, Kalshi has maintained that the CFTC — rather than individual state gaming regulators — has jurisdiction over trading on its exchange.
In April, the Third U.S. Circuit Court of Appeals delivered Kalshi an important victory.
The court concluded that Kalshi had demonstrated a reasonable likelihood of succeeding on its argument that its sports-event contracts qualify as swaps under federal law and that the Commodity Exchange Act preempts New Jersey laws attempting to regulate those contracts.
New Jersey now wants the Supreme Court to review that decision.
Attorney General Jennifer Davenport argued that Congress did not intend to remove sports betting from state oversight when it expanded federal derivatives regulation through the Dodd-Frank Act. The state has also pointed to issues including licensing requirements, protections against underage gambling and other safeguards imposed on conventional sportsbooks.
New Jersey's Supreme Court petition became considerably more significant after a separate case involving Kalshi and Nevada.
On August 28, the Ninth U.S. Circuit Court of Appeals ruled that Nevada could enforce its gaming laws against Kalshi's sports prediction markets.
Unlike the Third Circuit, the Ninth Circuit concluded that Kalshi's sports-event contracts do not qualify as swaps under the relevant federal definition.
The court drew a direct comparison between the products available on Kalshi and bets offered by sportsbooks, noting that users can trade on outcomes including point spreads, player propositions and combinations of sporting events.
That leaves Kalshi facing two very different interpretations of federal law.
In New Jersey, the Third Circuit has supported the argument that federal commodities law prevents the state from regulating Kalshi's sports contracts.
In Nevada, the Ninth Circuit has concluded that state gaming regulation can apply.
That disagreement significantly increases the importance of the Supreme Court petition.
The consequences extend well beyond New Jersey.
Sports have become a major part of the prediction-market business, while the distinction between event contracts and traditional sports betting has become increasingly difficult to ignore.
Kalshi itself has marketed sports products to consumers while maintaining that the underlying regulatory structure is fundamentally different from that of a sportsbook.
That distinction is what allows federally regulated event-contract platforms to potentially operate in jurisdictions where traditional online sports betting is restricted or unavailable.
States, meanwhile, argue that allowing sports prediction markets to rely exclusively on federal regulation could effectively create a separate nationwide sports betting system outside the licensing, taxation and consumer-protection frameworks they apply to sportsbooks.
The Third Circuit and Ninth Circuit have now offered conflicting answers to that debate.
For Kalshi, a Supreme Court ruling could therefore have consequences far beyond one state. Other companies offering federally regulated sports event contracts could also be affected by any eventual decision defining where CFTC authority ends and state gambling authority begins.
For now, nothing changes simply because New Jersey filed the petition.
The Supreme Court must first decide whether it will hear the case. It accepts only a small percentage of the petitions it receives each year.
The conflicting appellate rulings, however, give the justices a clearer reason to consider the issue than existed earlier in the prediction-market legal battle.
Until then, the regulatory picture remains fragmented.
Kalshi remains federally regulated by the CFTC, but individual states continue to challenge whether that status is enough to shield its sports markets from state gambling laws.
A legal fight that has played out state by state could now be moving toward a much bigger question: whether prediction markets can maintain a national sports-trading model under federal regulation, or whether they ultimately have to play by the same state-by-state rules as sportsbooks.
