Split appeals rulings put Kalshi oversight before Supreme Court

Third Circuit backs federal oversight; Ninth Circuit sides with states

New Jersey asked the U.S. Supreme Court on Wednesday to resolve a multibillion-dollar legal fight over whether the prediction-market platform Kalshi should be regulated by federal commodities authorities or by state gambling regulators. The petition, filed by the New Jersey Attorney General’s Office, follows conflicting rulings from two federal appeals courts on who should oversee an industry that has rapidly expanded into nearly every corner of public life — from sports outcomes and election results to corporate earnings calls.

The dispute centers on Kalshi, a federally registered commodities exchange that lets users wager on the outcomes of real-world events. Sports bets have become the dominant product across the industry, typically representing 80 percent or more of prediction-market platforms’ weekly trading volume.

Kalshi has argued that because it is registered with the Commodity Futures Trading Commission, federal law preempts state regulation. State regulators and established sportsbooks counter that Kalshi is, in practical terms, a sportsbook that should be subject to the same state taxes, licensing requirements, and consumer protections as FanDuel, DraftKings, and other licensed operators.

The Supreme Court petition follows conflicting rulings from two federal appeals courts. In April, the Third Circuit found that the CFTC has the exclusive right to oversee the prediction-market sector in a lawsuit Kalshi brought against New Jersey. Last week, the Ninth Circuit reached the opposite conclusion in a case involving Nevada, ruling that states — not the federal government — should regulate the industry.

In its petition, lawyers for the New Jersey Attorney General’s Office argued that the federal law at issue, the Commodity Exchange Act, does not allow prediction-market operators to sidestep state law. “States have always maintained the primary police powers for health and safety matters, including for gambling,” the attorneys wrote. “Nothing in the Act gives the CFTC unprecedented authority to become the sole regulator of sports gambling in this country, much less gives companies a get-out-of-50-state-laws-free pass by self-certifying their bets on a CFTC-registered market.”

Kalshi pushed back, asserting that federal regulations covering financial investments apply to its markets and override state laws. “Kalshi is an open, nationwide financial exchange,” company spokeswoman Dani Lever said. “It cannot be regulated by 50 different regulators. We remain confident in the lower courts’ rulings, and nothing in New Jersey’s filing today changes our view.”

State-regulated sports betting services — including FanDuel and DraftKings, which are subject to billions of dollars in state taxes — have been among the prediction-market industry’s antagonists, viewing the platforms as fast-growing rivals that are cutting corners.

If the Supreme Court agrees to take the case, arguments could be scheduled for the fall, with a decision expected by next summer.