New Jersey Petitions US Supreme Court to Regulate Prediction Markets as Gambling

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New Jersey Challenges Third Circuit Ruling

Court of Appeals for the Third Circuit in Philadelphia. According to court filings, a divided three-judge panel voted 2-1 on April 6, 2026, to uphold a lower court injunction that blocked New Jersey from enforcing its sports wagering laws against Kalshi. The majority ruled that the Commodity Futures Trading Commission (CFTC) holds exclusive authority to regulate such platforms under the Commodity Exchange Act, superseding state betting statutes.

New Jersey Attorney General Jennifer Davenport stated in the petition that the dispute affects dozens of active lawsuits across at least 20 states where state gambling regulations have faced federal challenges. According to the Attorney General’s office, Kalshi began offering sports event contracts on its exchange in January 2025 after self-certifying them with the CFTC. The New Jersey Division of Gaming Enforcement subsequently issued a cease-and-desist letter, arguing that the platform violated the state’s Sports Wagering Act and state constitutional restrictions on sports betting.

“Companies like Kalshi claim to offer legal sports betting in all 50 states, but refuse to comply with any state’s gambling laws,” Davenport said in public statements released by her office. Mary Jo Flaherty, interim director of the Division of Gaming Enforcement, added that Kalshi accepted wagers from New Jersey residents on collegiate sports events involving local teams, which are prohibited under state law.

Circuit Split Creates Supreme Court Opening

The New Jersey filing highlights a widening split between federal appeals courts that increases the likelihood of Supreme Court review. Court of Appeals for the Ninth Circuit issued a unanimous ruling on August 28, 2026, siding with the state of Nevada. The Ninth Circuit concluded that federal commodities laws did not strip states of their historical authority to regulate sports gambling.

According to court documentation, the Ninth Circuit found that Congress did not implicitly preempt decades of accumulated state, federal, and tribal gaming regulations when it passed financial reform legislation in 2010. This direct conflict between the Third and Ninth Circuits has drawn intense scrutiny from state regulators nationwide.

A coalition of 44 states filed an amicus brief supporting broader state oversight, characterizing unlicensed prediction markets as unsupervised gambling houses that bypass consumer protections and tax obligations. Major commercial sports betting operators including FanDuel and DraftKings, alongside various Indigenous tribes, have also opposed the federal preemption model pursued by prediction exchanges.

Platform Defense and Wider Financial Market Impact

Kalshi has maintained that it operates as a designated contract market under federal oversight rather than a traditional sportsbook. Representatives for the platform stated that they expect to prevail in the litigation. Despite federal court protections in certain jurisdictions, Nevada, Michigan, and Washington have successfully secured judicial orders suspending Kalshi’s sports-related contracts within their borders.

The legal dispute also intersects with digital asset markets. According to regulatory filings, Kalshi permits cryptocurrency deposits and withdrawals, while platforms like Polymarket utilize on-chain stablecoin collateral.