New Jersey hands the Supreme Court the choice between fifty gaming regulators and one CFTC
Sports contracts run above 80% of a market that went from $2bn in August 2025 to $38.5bn. Whether the justices take New Jersey's petition this fall will decide which compliance bill the industry pays.
The Investor · Invest desk
What happened
- New Jersey's petition asks the Supreme Court whether Dodd-Frank preempted states from regulating sports bets placed inside their borders when those bets are offered on markets registered with the CFTC.
- It targets an April Third Circuit opinion that split 2-1 against New Jersey's gaming authorities and credited Kalshi's claim that the Commodity Exchange Act displaced state law.
- The filing arrived barely a week after the Ninth Circuit ruled 3-0 that states may regulate prediction markets as sports betting, siding with Nevada.
- Nevada, Michigan and Washington have already secured court orders pausing Kalshi's sports contracts while the underlying jurisdictional question remains open.
- Kalshi's spokeswoman Dani Lever calls the company an open, nationwide financial exchange that cannot be regulated by 50 different regulators.
Why it matters
- Who's exposed exposure By New Jersey's own reading, the widest possible Kalshi win would make sports betting conducted off CFTC-registered markets unlawful, which puts the tax-paying licensed books on the wrong side of the ruling they are helping to fight.
- What it limits constraint Money committed to this sector before a fall cert decision and a ruling due next summer is being priced without knowing whether the compliance line item is one federal registration or dozens of state licences.
- Who has to decide decision Every quarter of unresolved jurisdiction pushes Kalshi to fund state-by-state licensing and litigation capacity it argues should not exist, which is engineering and marketing budget not spent on new contract types.
- What doesn't add up contradiction The CFTC chairman's exclusive-jurisdiction position and the 44 states' unlicensed-sportsbook position cannot both be operative law, so an operator choosing which to plan against is effectively taking a position on cert.
Next story · Invest · Oct 9
CFTC carves casino gambling out of its swap definition to claim event contracts for itselfConfirmed6 publishers
New Jersey's own announcement contains a term that cuts against Kalshi's allies of convenience: it argues that because federal law prohibits trading swaps off CFTC-registered markets, a Kalshi victory would seemingly make all sports gambling off such markets illegal even where state law allows it [6]. Treat that as a pricing problem rather than a constitutional one: the maximal version of preemption does not merely free Kalshi from New Jersey gaming law, it makes the registered venue the only lawful venue, and a state-licensed sportsbook paying gaming tax becomes an unregistered swaps market. Which is a plausible reading of why FanDuel and DraftKings are lined up with the 44-state coalition and the tribes rather than quietly rooting for the exchange to win [15][16].
The volume is why anyone is funding the litigation. Cryptopolitan puts total prediction-market volume at $38.5bn against $2bn in August 2025 [19], an increase of $36.5bn and a multiple of 19.25 on that base [24], and with sports wagers above 80% of weekly volume [18] roughly $30.8bn of it sits in the product Nevada, Michigan and Washington have already frozen by court order [26][17]. No take rate appears anywhere in the petition coverage, so converting that $38.5bn into an enterprise value means filling in a number this filing simply does not supply.
The judicial tally, or rather the only tally currently available: the Third Circuit went 2-1 for Kalshi in April [2], the Ninth Circuit went 3-0 for Nevada barely a week before the petition [14], so of the six appellate judges who have voted, four favoured state authority and two federal preemption [23]. Counting judges settles neither cert nor the merits, though the 44 signatory states have secured just three pausing orders between them, about one for every fifteen states [25].
This is probably wrong, but the cert grant matters less to Kalshi's economics than the calendar does. The justices are expected to decide this fall whether to hear the case and to rule by next summer [7], and in that interval the operating regime is whatever injunctions individual states can obtain, which is the fifty-regulator outcome spokeswoman Dani Lever says the exchange cannot function under [8][9]. The counter-thesis is federal posture: CFTC chairman Mike Selig maintains his agency holds exclusive jurisdiction and has pushed the platforms to grow [10], and a denial of cert leaves the Third Circuit's reasoning that event contracts differ from sportsbooks intact where it applies [3].
A denial leaves a geographic patchwork and forces Kalshi to run two products, one national and one that switches off at a state line. A grant that affirms the swaps theory gives Kalshi the nationwide exchange and gives the licensed books the problem New Jersey described [6]. A grant that reverses puts both platforms back under state gaming law, and because Kalshi takes crypto deposits and Polymarket leans on on-chain stablecoin guarantees, the unwind reaches past the sportsbooks into those rails [20]. What would prove this desk wrong is the mix: if non-sports contracts grow enough that sports drops well below its current 80-plus percent share [18], state injunctions stop being existential and become a discontinued line.
What to watch
- Which vehicle the justices pick this fall, New Jersey's petition or the Kalshi case that went to the appellate court in Nevada.
- Whether the CFTC files in support of Kalshi, having declined to comment to Cointelegraph on the petition.
- The price on Polymarket's own contract for when the Supreme Court hears a prediction markets case.
Information, not investment advice. This story is general information about companies and markets, drawn from cited reporting. It is not a recommendation to buy, sell or hold any security; check the cited sources before acting.
Clarity's read
What the record supports and how the coverage leans. The claims behind it follow.
Reality
- Evidence60
- Adoption55
- Hype gap+15
- Incentives70
- Confidence58
Claim ledger
Ranked by verification strength, evidence, and original report placement.
- [1]
New Jersey petitioned the US Supreme Court on Wednesday to allow states to classify prediction markets like Kalshi and Polymarket as gambling, the first time the two-year dispute has reached the justices.
- [2]
The petition challenges an April opinion from the US Court of Appeals for the Third Circuit in which judges ruled 2-1 against New Jersey's gaming authorities, accepting Kalshi's argument that it had a reasonable chance of success in claiming the Commodity Exchange Act preempted state law.
- [3]
The Third Circuit held that Kalshi's event contracts are legally different from sportsbooks and should fall under federal oversight, with the CFTC holding exclusive power over platforms like Kalshi and Polymarket.
- [4]
State Attorney General Jennifer Davenport said: "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."
- [5]
New Jersey's filing argues the Commodity Exchange Act did not empower the CFTC to act as "the sole regulator of sports gambling in this country" and that health and safety matters have always rested with the states.
- [6]
The New Jersey AG's announcement said: "Because federal law prohibits trading swaps off CFTC-registered markets, a victory for Kalshi would mean that all sports gambling off such CFTC-registered markets would seemingly become illegal even if state law allows it."
- [7]
The justices are likely to decide this fall whether to hear the case, with a ruling expected next summer, by summer 2027.
- [8]
Kalshi spokeswoman Dani Lever said: "Kalshi is an open, nationwide financial exchange. It cannot be regulated by 50 different regulators."
- [9]
Lever told Cointelegraph that Kalshi disagreed with New Jersey's decision to appeal to the Supreme Court and said, "We remain confident in the lower courts' rulings, and nothing in New Jersey's filing today changes our view."
- [10]
CFTC Chairman Mike Selig, a Trump appointee, says his agency has exclusive jurisdiction over prediction markets and has pushed for them to grow.
- [11]
Cointelegraph reached out to the CFTC for comment on the petition but did not receive an immediate response.
- [12]
Kalshi is the most popular prediction site in the country and is named in New Jersey's petition.
- [13]
The petition presented the question of whether the 2010 Dodd-Frank Wall Street Reform and Consumer Protection Act preempted states from regulating sports bets that occur within their jurisdictions if those bets are offered on markets registered with the CFTC.
- [14]
New Jersey's petition came barely a week after the Ninth Circuit's 3-0 ruling allowing states to regulate prediction markets as sports betting, siding with Nevada.
- [15]
A coalition of 44 states has described the prediction sites as unlicensed sportsbooks that evade consumer-protection rules and tax obligations carried by traditional betting.
- [16]
Native American tribes and established gaming operators have joined the states, with operators like FanDuel and DraftKings viewing the prediction sites as competitors cutting corners.
- [17]
Three states, Nevada, Michigan and Washington, have secured court orders pausing Kalshi's sports contracts.
- [18]
Sports wagers account for over 80% of weekly prediction-market volume.
- [19]
Cryptopolitan reported total prediction-market volume jumped to $38.5 billion from $2 billion in August 2025, a 1,900% increase.
- [20]
Kalshi allows crypto deposits and withdrawals and Polymarket focuses on on-chain stablecoin guarantees, so a state-by-state shutdown would affect crypto markets.
- [21]
Polymarket lists an event contract on when the US Supreme Court will hear a prediction markets case.
- [22]
Whether the justices will take up the issue is unclear, and experts have speculated they could weigh in instead on the Kalshi case that went to the appellate court in Nevada, or on a later enforcement action against a different company.
- [23]
Across the two appellate panels, four of the six judges who have voted favoured state authority (one Third Circuit dissenter plus three in the Ninth Circuit) and two favoured federal preemption.
- [24]
Prediction-market volume rose by $36.5bn from the August 2025 level, a multiple of 19.25 times that base.
- [25]
The 44-state coalition holds three court orders pausing Kalshi's sports contracts, about one order per fifteen signatory states.
- [26]
At more than 80% of volume, sports contracts represent roughly $30.8bn of the $38.5bn total.
Sources
2 independent publishers whose own reporting we read for this story.
- cointelegraph.comNew Jersey officials petition US Supreme Court over prediction markets
1 article · September 2, 2026
- cryptopolitan.comNew Jersey drags Supreme Court into prediction market regulation clash
1 article · September 2, 2026