New Jersey on Wednesday asked the U.S. Supreme Court to decide whether prediction markets can use federal law to override state gambling rules.
The state’s petition for a writ of certiorari asks whether the 2010 Dodd-Frank Act preempted states from regulating sports bets offered on markets registered with the Commodity Futures Trading Commission. The filing says the issue goes to states’ power to police gambling within their borders.
As covered in July, New Jersey had already moved to tax prediction-market income, a sign of how closely the sector was being watched in Trenton.
According to the attorney general’s office, Kalshi has claimed it can offer legal sports betting in all 50 states without following state gambling laws. The state argues that New Jersey and others have adopted careful rules to curb compulsive gambling, keep minors out of the market and prevent insider trading on sports games. Mary Jo Flaherty, the interim director of the New Jersey Division of Gaming Enforcement, called it a states’ rights issue and said Kalshi does not abide by the state’s gaming laws.
Kalshi, for its part, says it is an open, nationwide financial exchange and should not face 50 separate regulators. The company began offering sports event contracts in January 2025, and the New Jersey filing says sports-related contracts quickly became the platform’s main business. New Jersey’s office said 95% of Kalshi’s revenue in 2025 came from sports betting, and the Ninth Circuit said more than 90% of its trades that year were sports-related.
The dispute began in New Jersey in March 2025, when state regulators sent Kalshi a cease-and-desist letter over unauthorized sports betting. Kalshi sued, arguing that its contracts were swaps regulated only by the federal government, and a judge temporarily blocked New Jersey from enforcing its gambling laws while the case moved ahead.
In April, the Third Circuit upheld that injunction in KalshiEX LLC v. Flaherty, saying the Commodity Exchange Act preempted New Jersey law because Kalshi’s sports-related event contracts fell within the statute’s swap definition. Last week, however, the Ninth Circuit reached the opposite result in a Nevada case, ruling that Kalshi’s sports contracts were not swaps and that the state could enforce its gambling laws.
New Jersey says the conflicting appellate rulings create a circuit split that the Supreme Court should resolve. The attorney general’s office also said this is the first certiorari petition filed with the court over the legality of this business model, and said 44 states, hundreds of tribes and casinos have opposed the same theory in related litigation.
