New Jersey’s prediction markets Supreme Court petition, filed on 2 September 2026, has set up what could become the definitive legal reckoning over who controls a rapidly expanding corner of American gambling: the federal government or the states.
Attorney General Jennifer Davenport put the state’s position plainly. ‘We’re calling on the Supreme Court to resolve this issue and recognise that Congress did not silently make the sports-betting industry immune from state law,’ she said in a statement accompanying the New Jersey AG’s certiorari filing.
The petition names KalshiEX, LLC as the respondent, with Mary Jo Flaherty, Interim Director of the New Jersey Division of Gaming Enforcement, as co-petitioner. It is the first certiorari petition filed with the US Supreme Court on the prediction markets question, according to the petition for writ of certiorari.
A Circuit Split That Demanded a Higher Court
The stakes are not abstract. Sports betting generated $16.89 billion in state revenue in 2025, not including sportsbooks operated by tribal casinos, according to the petition. New Jersey argues that prediction market platforms are encroaching on that regulated industry without state oversight.
The central legal conflict is a direct contradiction between two federal appeals courts. In April 2026, the Third Circuit issued a 2-1 opinion in KalshiEX LLC v. Flaherty, written by Judge David J. Porter, holding that the Commodity Exchange Act pre-empts state gambling laws as applied to sports-related event contracts traded on Commodity Futures Trading Commission (CFTC)-registered markets. It was the first federal appellate ruling to reach that conclusion, according to Holland and Knight’s analysis of the ruling.
Then came the 9th Circuit, which went the other way. On 28 August 2026, a unanimous three-judge panel ruled that sports-related event contracts are not swaps regulated by the CFTC, rejecting appeals from Kalshi, Crypto.com, and Robinhood Derivatives LLC against the Nevada Gaming Control Board, according to Bloomberg Law. The 9th Circuit found that Kalshi customers could effectively take positions resembling point-spread, prop, and parlay wagers offered by licensed sportsbooks, and noted that Kalshi had previously promoted itself as the first legal sports betting app available in all 50 states, according to reporting on the ruling.
New Jersey’s petition argues the split ‘justifies certiorari,’ and is direct about the Third Circuit’s April decision: ‘The Third Circuit’s profoundly important decision is also profoundly wrong.’
The Prediction Markets Supreme Court Fight Reflects a Deeper Regulatory War
The CFTC views sports-related event contracts as swaps, placing them under its exclusive federal jurisdiction. Forty-four state attorneys general disagree, arguing the contracts amount to sports betting and fall under state authority. The agency has sued nine states to defend its position, according to CNBC.
CFTC Chairman Michael S. Selig filed an amicus brief in the 9th Circuit in February 2026, characterising the situation in stark terms: ‘CFTC-registered exchanges have faced an onslaught of lawsuits seeking to limit Americans’ access to event contracts and undermine the CFTC’s sole regulatory jurisdiction over prediction markets.’
On the other side, Nevada Gaming Control Board Chairman Mike Dreitzer said the 9th Circuit ruling ‘vindicates’ that sports betting ‘needs to be properly regulated by the state,’ which Nevada has been doing ‘for more than 70 years,’ according to the Nevada Independent.
The litigation has spread well beyond the two circuits that have already ruled. Active suits are pending across at least 20 states, with the gambling laws of several states currently enjoined by federal courts, according to the New Jersey AG’s office. Cases are also pending in the Fourth and Sixth Circuits.
At the centre of that dispute is a company generating the bulk of its income from the very activity states want to regulate. 95% of Kalshi’s revenue in 2025 came from sports betting, according to New Jersey’s petition. New Jersey’s Division of Gaming Enforcement had sent Kalshi a cease-and-desist letter in March 2025, giving it until 11:59 p.m. on 28 March 2025 to confirm it had ceased sports wagering activities in the state and voided existing wagers, or face enforcement action.
Kalshi did not respond to a request for comment. Shares for DraftKings and Flutter Entertainment, parent of FanDuel, both rose by more than 5% after New Jersey filed its petition, a market signal that investors read the state challenge as ultimately favourable to licensed sportsbooks.
Bank of America, in a note issued the same day, offered a measured assessment: ‘Based on our conversations with legal experts, we think it is still possible the Supreme Court waits until next year before hearing the case as there are still pending cases in other federal circuits.’ With the Fourth and Sixth Circuits yet to rule, the justices may choose to let the circuit split deepen before stepping in. If they do take the case on, the outcome will redraw the regulatory map for a multi-billion-dollar industry.
