On Wednesday, New Jersey escalated its legal battle regarding sports betting by petitioning the U.S. Supreme Court to clarify the legality of platforms like Kalshi that engage in prediction markets for sports events. This pivotal move was made by New Jersey Attorney General Jennifer Davenport, who initiated the process after the Ninth Circuit Court of Appeals ruled against such prediction markets, creating a conflicting legal landscape following the April decision from the Third Circuit that permitted Kalshi and similar firms to sell sports event contracts in New Jersey.
Davenport asserted in her statement, "Companies like Kalshi claim to offer legal sports betting in all 50 States, but they refuse to follow the gambling laws of any State. 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 petition specifically asks the justices to determine whether the 2010 Dodd-Frank Wall Street Reform and Consumer Protection Act exempted states from regulating sports bets made within their jurisdictions, if those bets are placed on markets approved by the Commodity Futures Trading Commission (CFTC).
"At issue is whether Congress federalized a multi-billion-dollar sports-betting industry via a single word and its definition—'swap'—in Dodd-Frank. After all, if Kalshi is right that it can offer sports bets on federal exchanges irrespective of state law, companies can disregard all state sports-gambling statutes with ease, so long as they register with the CFTC," the petition argues, referencing the meaning of 'swap', which was central to the Third Circuit's favorable decision for Kalshi.
Following the filing, gaming law expert John Holden from Indiana University explained that it may take several months for the Supreme Court to decide whether to hear the Kalshi case. The petition sets in motion a series of procedural steps over the next couple of months:
– Kalshi must submit an opposition brief within 30 days.
– New Jersey will then have 10 days to respond.
– Typically, SCOTUS holds a conference to decide on the matter about a month after that.
Possible outcomes for the court include granting certiorari, denying it, delaying the decision for another conference, or requesting further analysis from the U.S. Solicitor General. Holden noted that if the Court asks for additional analysis, it could extend the decision timeline.
The legal journey to this point began 18 months ago, shortly after Kalshi introduced sports betting on its platform in January 2025. The New Jersey Division of Gaming Enforcement (DGE) swiftly issued cease-and-desist orders to Kalshi and Robinhood, demanding they halt any form of sports wagering to New Jersey residents and nullify existing bets.
In response, Kalshi took legal action against New Jersey, asserting that only the CFTC governs its operations. A district court then granted a temporary injunction, allowing the continuation of sports event contracts. This ruling led to an appeal by the DGE, culminating in a favorable decision for Kalshi from the Third Circuit, which ruled that these sports bets constitute swaps under the Commodities Exchange Act (CEA).
The Third Circuit's majority opinion suggested, "Because Kalshi’s sports-related event contracts are traded on a CFTC-licensed DCM and depend on event outcomes associated with economic consequences, they fit within the Act’s definition of 'swaps' subject to the CFTC’s jurisdiction."
However, the most recent Ninth Circuit decision contested the Third Circuit's interpretation, which solidified the need for the Supreme Court to resolve this issue. The Ninth Circuit concluded, "But because Congress has spoken on the issue of gambling in other statutes (and did not impliedly repeal or amend those statutes through Dodd-Frank), there is no limiting principle to Kalshi’s broad reading of the definition of swap and adopting that reading would assume that, by granting the CFTC regulatory authority over gaming nationwide, Congress 'hid an elephant in a mousehole.' Thus, we conclude that these sports event contracts are likely not swaps under the CEA."
