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- New Jersey petitioned the Supreme Court to clarify if platforms like Kalshi face state gambling laws or federal CFTC regulation.
- States argue prediction contracts evade local gaming taxes, while operators maintain they offer federally regulated financial products.
New Jersey has asked the U.S. Supreme Court to step into the fast-growing fight over whether prediction markets such as Kalshi are federally regulated exchanges or effectively sports betting platforms subject to state gambling law.
The filing raises stakes for operators, state regulators and tribal gaming groups because the outcome could decide who controls sports-related event contracts nationwide. It also comes after conflicting appellate rulings in 2026: one court said New Jersey’s gaming laws do not apply to Kalshi, while another said Kalshi is not immune from Nevada’s gambling laws.
Split court rulings put federal and state authority on a collision course
According to Politico, the broader dispute now involves Republican and Democratic attorneys general, dozens of Native American tribes, the gambling industry, and prediction market companies including Kalshi and Polymarket U.S.
Prediction market operators argue they are offering federally regulated financial products. The Commodity Futures Trading Commission has backed that position in court and said event contracts on prediction markets are swaps, including when the underlying event involves sports or culture.
CFTC spokesperson Beau Brooks said the agency “will continue to vigorously defend its exclusive jurisdiction over these markets in the courts.” He also argued that, under the states’ theory, regulators could try to ban contracts tied to elections, weather or Federal Reserve decisions by calling them gambling.
States and tribal groups are taking the opposite view. They argue the platforms are functionally sports betting sites and should follow state gambling rules, licensing systems and tax structures. The article noted that 44 state attorneys general have criticized the CFTC’s authority over sports prediction markets.
Sports contracts are at the center of the case
Kalshi general counsel Rick Heaslip told Politico, “We are not a casino. We don’t operate table games. We don’t operate slot machines. We have markets.” He also said sports currently account for about 70 percent of the company’s activity.
That sports-heavy mix is a major reason states are pushing back. Critics say prediction markets are sidestepping state gaming taxes that help fund schools, roads and local communities. Politico reported that state gaming taxes reached about $18 billion in 2025, and that sports betting remains illegal in 11 states.
The challenge also has implications for tribal gaming sovereignty. Rebecca George, executive director of the Washington Indian Gaming Association, told Politico that “a bet on a football game does not become a financial product just because it is traded on an exchange.”
What happens next depends on whether the Supreme Court agrees to hear the case and how it frames the question. A ruling could determine not just the future of sports event contracts, but whether prediction markets generally are governed mainly by federal derivatives law or by state and tribal gambling rules.
Source: As reported by Declan Harty.
