New Jersey Takes Prediction Markets Dispute to Supreme Court

_{The U.S. Supreme Court has been busy lately with prediction market cases involving Kalshi and Polymarket. (Photo: Stu Gray / Alamy)}

The New Jersey Attorney General’s Office has asked the Supreme Court of the United States to weigh in on whether states have the ability to regulate prediction markets, setting up a showdown in the nation’s highest court that has been widely expected from industry observers.

A case of this nature heading to the Supreme Court seemed inevitable after two separate federal circuit courts came to opposite conclusions over the issue of whether states have the right to regulate prediction markets like Kalshi and Polymarket, or whether those businesses are exclusively under the jurisdiction of the federal Commodity Futures Trading Commission (CFTC).

Circuit Split Leads to Likely Supreme Court Showdown

In April, the 3rd Circuit Court of Appeals ruled in favor of Kalshi after the prediction market filed a case against New Jersey when the state sought to subject the platform to its sports betting regulations. That 2-1 decision is the one that New Jersey officials are seeking to get overturned by the Supreme Court.

That course of action became all but certain in late August when the 9th Circuit Court of Appeals issued a unanimous decision in favor of Nevada’s effort to regulate prediction markets at the state level. The conflicting rulings at the appellate level meant that it was only a question of who would be the first to ask the Supreme Court to step in – a race won by New Jersey.

“States have always maintained the primary police powers for health and safety matters, including for gambling,” New Jersey attorneys wrote in the state’s petition. “Nothing in the [Commodity Exchange Act] gives the CFTC unprecedented authority to become the sole regulator of sports gambling in this country, much less gives companies a get-out-of-50-state-laws-free pass by self-certifying their bets on a CFTC-registered market.”

A Bet or Not a Bet? That’s the Legal Question

In most cases, states and other critics haven’t argued that prediction markets are illegal or that they’re not under the CFTC’s authority. Instead, they have taken issue with the wide range of contracts that have sprung up in the past two years, particularly on the sports event contracts that now make up the vast majority of volume at the platforms.

“These guys are selling alcohol in a juice box and calling it juice,” Washington Indian Gaming Association Executive Director Rebecca George told Politico. “A bet on a football game does not become a financial product just because it is traded on an exchange.”

On the other hand, prediction markets and the CFTC say the opposite essentially: that a financial product doesn’t stop being a financial product just because it’s related to the outcome of a sporting event.

“Kalshi is an open, nationwide financial exchange,” Kalshi spokesperson Dani Lever said, via NPR. “It cannot be regulated by 50 different regulators. We remain confident in the lower courts’ rulings, and nothing in New Jersey’s filing today changes our view.”

For the case to receive a full review by the Supreme Court, at least four justices must agree to grant a writ of certiorari, though that is likely in a case with a circuit split where a SCOTUS decision would have nationwide ramifications. If New Jersey’s petition is accepted, oral arguments could take place as soon as this fall, with the court most likely releasing a decision by next summer.

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