Will Kalshi’s legal battle reach the US Supreme Court?

The legal battle over sports prediction markets is heading toward a potential showdown at the US Supreme Court. A coalition of states, gaming industry groups, Tribal interests and the NFL is backing New Jersey's challenge to Kalshi. 

In September, New Jersey authorities petitioned the US Supreme Court to decide whether states can regulate sports betting through prediction markets operated by Kalshi and competing platforms. The petition has since attracted support from a range of stakeholders, increasing pressure on the court to resolve the dispute. 

At the same time, the differing interpretations of federal law across circuit courts could strengthen the case for review, although the Supreme Court has not yet agreed to hear it. 

The original New Jersey case 

The case dates back to April, when a federal appeals court ruled that New Jersey gaming regulators could not prevent Kalshi from allowing in-state users to trade contracts tied to sporting event outcomes. 

A three-judge panel of the Philadelphia-based Third US Circuit Court of Appeals ruled 2-1 in Kalshi's favor. The panel found that the Commodity Exchange Act (CEA) governs the sports-related event contracts offered on its platform, preempting the application of New Jersey gambling law in this case. 

The ruling exposed a fundamental disagreement over whether sports prediction markets should be treated as financial trading platforms or as a form of sports betting subject to state regulation. 

In its petition, New Jersey argues that the decision could undermine state gambling laws by allowing prediction market operators to offer sports-related contracts without complying with local regulations. 

The case draws wider opposition 

The National Council of Legislators from Gaming States (NCLGS) was among the first organizations to support New Jersey's challenge, asking the US Supreme Court in late September to review the dispute. 

In an amicus brief, NCLGS similarly argued that the Third Circuit's ruling could undermine states' authority over sports betting and other gaming activities. It supports the New Jersey attorney general and state gaming regulators in their effort to have the Supreme Court review the case. 

The organization also warned that if Kalshi can offer sports betting products outside state gambling regulations, traditional casinos, sportsbooks and other licensed gaming businesses could restructure their products to claim the same federal status. 

A growing coalition seeks Supreme Court review 

The push for Supreme Court review gained further momentum when Ohio and 38 other states, along with the District of Columbia, urged the justices to take up the case. 

In a filing submitted on October 7, the coalition asked the court to determine whether the CEA prevents states from enforcing their sports gambling laws against contracts listed on federally regulated exchanges. 

The states argue that the CEA's definition of a swap does not cover sports wagers offered through prediction markets. Kalshi, by contrast, maintains that its contracts fall under the exclusive jurisdiction of the Commodity Futures Trading Commission (CFTC), placing them beyond the reach of state gambling regulators. 

Gaming industry and Tribal interests join the fight 

On October 8, the American Gaming Association (AGA) and a coalition of 145 Tribal parties submitted separate briefs to the Supreme Court, adding further weight to New Jersey's challenge. 

The AGA argued that licensed gaming operators invest heavily in state-specific compliance systems, including geolocation technology, account controls, restrictions on permitted wagers and reporting requirements. They also pay licensing fees and taxes. 

According to the association, sports-related products offered through prediction markets could bypass these requirements under the Third Circuit's ruling, creating an uneven regulatory playing field. 

The AGA also raised concerns about consumer protections, including safeguards for younger users, statewide self-exclusion programs, advertising restrictions and limits on college sports betting. It argued that Kalshi accepts sports trades from users aged 18 to 20 in states where the minimum age for placing sportsbook wagers is 21. 

The Tribal brief was filed on behalf of 130 federally recognized Tribes and 15 Tribal organizations. It argues that the Indian Gaming Regulatory Act gives Tribes authority over gaming on their lands, often through compacts negotiated with states. 

The coalition warned that prediction market contracts offered on Tribal lands without Tribal authorization could undermine Tribal gaming exclusivity and threaten revenue used to fund public services. 

Meanwhile, the NFL also told the Supreme Court that states should regulate prediction markets. Nevertheless, the league is not opposed to prediction markets in the first place. 

What comes next? 

The US Supreme Court could ultimately deliver a decision with far-reaching implications for sports prediction markets, although no immediate action is expected. Kalshi’s deadline to respond to New Jersey’s petition is November 9. 

Furthermore, Supreme Court review is not guaranteed. At least four of the nine justices must vote to hear the case, and the Court accepts only a small fraction of petitions. However, differing rulings among federal appeals courts could strengthen the argument for intervention and the need for a definitive interpretation of federal law. 

The Third Circuit ruled in Kalshi’s favor, while the Ninth and Sixth Circuits have issued decisions supporting states’ authority to regulate sports prediction markets. Although the rulings differ in their legal reasoning and circumstances, the divide adds another dimension to the dispute. 

Given the case’s far-reaching implications, growing industry opposition and conflicting appellate rulings, it could prove one of the rare petitions the Supreme Court agrees to hear.