New Jersey asked the US Supreme Court on Wednesday to decide whether federal derivatives law preempts state gambling rules. It is the first state to bring the prediction-market jurisdiction fight to the justices.
Attorney General Jennifer Davenport and Mary Jo Flaherty, interim director of the state’s Division of Gaming Enforcement, filed a 332-page petition for a writ of certiorari, Cointelegraph reported. The filing presses the court on a single question: whether the 2010 Dodd-Frank Act stripped states of authority over sports bets offered on platforms registered with the Commodity Futures Trading Commission. In practice, that means asking whether a federal derivatives label can override a state gambling license.
The fight began last year. New Jersey sent Kalshi a cease-and-desist letter alleging the platform violated state gambling laws. Kalshi sued the state in response, The Block reported. By April, the US Court of Appeals for the Third Circuit had ruled 2-1 in Kalshi’s favor. The panel found the company had a “reasonable chance of success” on its preemption claim under the Commodity Exchange Act. New Jersey’s petition contests that reading.
The state’s argument turns on a label. The CFTC, under Chair Michael Selig, has argued the contracts amount to “swaps” under its purview and has claimed “exclusive jurisdiction” over them; the agency has sued several states and proposed its own framework for regulating prediction markets. New Jersey counters that sports bets are sports bets, and that “federal law does not preempt state sports-gambling laws regardless” of how the CFTC categorizes them. A swap falls under federal derivatives rules. A sports bet falls under state gambling statutes.
Officials put the stakes in stark terms. Because federal law prohibits trading swaps off CFTC-registered markets, the petition argues, a win for Kalshi “would mean that all sports gambling off such CFTC-registered markets would seemingly become illegal even if state law allows it.” The filing reframes preemption as a trap for the industry, not a shield.
New Jersey also broadened the frame beyond its own borders. Officials cited civil cases brought by gaming authorities in at least 20 states. Davenport was blunt. “Companies like Kalshi claim to offer legal sports betting in all 50 States, but they refuse to follow the gambling laws of any State,” she said in a statement. “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.”
Kalshi pushed back. “Kalshi is an open, nationwide financial exchange. It cannot be regulated by 50 different regulators,” spokesperson Dani Lever told Cointelegraph. “We remain confident in the lower courts’ rulings, and nothing in New Jersey’s filing today changes our view.”
The circuit split is uneven but live. Last week, the Ninth Circuit sided with a lower court ruling that Kalshi failed to show the CFTC preempts Nevada’s authority to regulate sports betting, The Block reported. That decision cuts against the Third Circuit’s April ruling for Kalshi. The CFTC did not immediately respond to a request for comment, both outlets reported.
Whether the justices take the case is unclear. Experts have speculated the court could weigh in through the Nevada matter instead. If granted, the petition would set the first Supreme Court test of a prediction-market platform’s reach into state gambling law.
