New Jersey Petitions US Supreme Court in Kalshi Sports Market Dispute

The state of New Jersey has escalated its legal battle over sports prediction markets by filing a petition with the U.S. Supreme Court. Attorney General Jennifer Davenport is asking the nation's highest court to determine if such markets can offer products based on sports outcomes without adhering to state-level gambling laws. The dispute centres on the activities of Kalshi, which has self-certified its sports-related contracts with the Commodity Futures Trading Commission (CFTC).

This legal challenge follows a lawsuit initiated by Kalshi against New Jersey in 2025 after the state attempted to enforce its gambling regulations against the company. Kalshi has since marketed its platform as a form of legal sports betting available across all 50 states, a position that directly challenges established state-by-state regulatory frameworks.

Conflicting Appellate Rulings

The petition to the Supreme Court, the first certiorari filing concerning this business model, was prompted by a split between two federal appellate courts. In a divided 2-1 decision in April 2026, the Third Circuit sided with Kalshi, ruling that its contracts are federally regulated swaps and that New Jersey's gambling statutes were therefore preempted. However, on 28 August, the Ninth Circuit explicitly disagreed with this conclusion, holding that bets tied to game outcomes do not fall under the exclusive jurisdiction of the CFTC.

The fundamental legal question is whether the 2010 Dodd-Frank Act effectively federalised sports wagering by classifying Kalshi's contracts as swaps, a move New Jersey argues Congress never intended. The state's petition contends that the CFTC itself has acknowledged it is not a gaming regulator and does not possess the specialised expertise for such oversight. Interim Division of Gaming Enforcement Director Mary Jo Flaherty has characterised the case as a matter of states' rights.

Widespread Opposition and Financial Stakes

The dispute has national implications, with litigation over prediction markets now pending in at least 20 states and federal courts enjoining the gambling laws of several. New Jersey's position has garnered significant support, with 44 states, numerous Tribes, and casino operators opposing Kalshi's legal interpretation. The state also co-led an amicus brief in the Ninth Circuit case, which was joined by 39 other jurisdictions.

The financial stakes are substantial. State-regulated sports betting, excluding tribal operations, generated $16.89 billion in revenue in 2025. According to New Jersey's petition, sports-related contracts accounted for 95 per cent of Kalshi's revenue during the same year. The state's petition is being led by a legal team including Solicitor General Jeremy Feigenbaum, Deputy Solicitor General Stephen Ehrlich, and Special Assistant Liza Fleming, with support from several Deputy Attorneys General.