New Jersey asks U.S. Supreme Court to decide whether prediction markets can bypass state sports betting laws
TRENTON, N.J. — New Jersey Attorney General Jennifer Davenport has asked the U.S. Supreme Court to decide whether prediction markets can offer sports wagers without complying with state gambling laws, an issue that has divided federal courts and prompted litigation across the country.
Davenport filed a petition asking the nation’s highest court to review a federal appeals court ruling involving Kalshi, a prediction market that New Jersey argues is offering sports betting without following the state’s gambling regulations.
“Companies like Kalshi claim to offer legal sports betting in all 50 States, but they refuse to follow the gambling laws of any State,” said Attorney General Davenport. “These companies have no right to offer their sports bets without following state law, which is why dozens of States across the ideological spectrum have opposed them. States have long adopted careful laws to regulate gambling, including to prevent compulsive gambling, gambling by minors, and insider trading on sports games. 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 dispute centers on whether sports-related contracts offered by prediction markets such as Kalshi fall exclusively under the jurisdiction of the federal Commodity Futures Trading Commission or remain subject to state gambling laws.
Kalshi sued New Jersey in 2025, arguing its sports wagers are “swaps” regulated exclusively by the CFTC and therefore are not subject to New Jersey’s gambling laws.
In April, the 3rd U.S. Circuit Court of Appeals ruled 2-1 in Kalshi’s favor, holding that New Jersey’s gambling laws are preempted, according to the Attorney General’s Office.
“Kalshi markets itself as the ‘first app for legal sports betting in all 50 States,’ including for wagering on NCAA games held in New Jersey and participated in by New Jersey teams, which is impermissible under New Jersey’s Constitution. But Kalshi does not abide in any way with our State’s gaming laws,” said Division of Gaming Enforcement Interim Director Mary Jo Flaherty. “This is a states’ rights issue. In New Jersey, gaming is prohibited by its Constitution, other than for exceptions approved by New Jersey voters. In this case, the State is upholding the will of New Jerseyans regarding the manner in which gaming can be conducted.”
New Jersey argues the appeals court’s ruling conflicts with decisions elsewhere in the country. Litigation over prediction markets and state gambling laws has emerged in at least 20 states, with dozens of lawsuits pending, according to the Attorney General’s Office.
On Aug. 28, the 9th U.S. Circuit Court of Appeals reached a different conclusion, ruling that sports bets on the outcomes of sporting events do not fall within the CFTC’s exclusive jurisdiction.
The 9th Circuit concluded that “Congress did not take a wrecking ball to all sports gambling regulations built up over decades by federal, state, and tribal governments” through the 2010 Dodd-Frank Wall Street Reform and Consumer Protection Act.
New Jersey co-led a brief in that case with 39 other jurisdictions. The 9th Circuit cited the brief in concluding “it is implausible that Congress intended to allow the CFTC to engage in the national regulation of gambling based on expansive definitions of the words ‘event’ and ‘associated with’ in a Wall Street reform bill.”
According to Davenport’s office, 44 states, hundreds of tribes and casinos have opposed legal arguments advanced by Kalshi and other prediction markets.
The state argues that allowing prediction markets to bypass state gambling laws could undermine protections intended to prevent underage and problem gambling, insider trading and other risks. The Attorney General’s Office also argues that state regulation helps ensure gambling operators have sufficient financial resources to pay winnings.
The petition further argues that a ruling for Kalshi could have broader consequences for the sports betting industry because federal law generally prohibits swaps from being traded outside CFTC-registered markets. New Jersey contends that could potentially jeopardize sports wagering conducted through traditional sportsbooks at casinos and on tribal lands.
The dispute comes eight years after the Supreme Court ruled for New Jersey in Murphy v. NCAA, striking down a federal law that effectively prevented states from authorizing sports betting. In that decision, the court said that if Congress chose not to “regulate sports gambling directly,” then “each state is free to act on its own.”
Davenport’s office said this is the first petition asking the U.S. Supreme Court to address the legality of prediction markets offering sports wagers self-certified with the CFTC without complying with state gambling laws.
