New Jersey Asks Supreme Court to Decide Whether State Gambling Laws Reach Kalshi Sports Contracts

New Jersey Attorney General Jennifer Davenport asked the U.S. Supreme Court on September 2 to decide whether states can enforce gambling laws against Kalshi’s federally regulated sports event contracts. The petition follows conflicting federal appeals court rulings from the Third and Ninth Circuits, creating the prediction market industry’s most direct Supreme Court test to date.

What is New Jersey asking the Supreme Court to decide?

New Jersey is asking the justices to resolve whether the Commodity Exchange Act, as amended by the 2010 Dodd-Frank Act, blocks state gambling regulators from applying sports-betting laws to event contracts listed on a CFTC-registered exchange. The New Jersey Attorney General’s Office said the petition was filed by Attorney General Jennifer Davenport and Division of Gaming Enforcement Interim Director Mary Jo Flaherty, according to the office’s September 2 release.

The dispute centers on Kalshi’s argument that sports event contracts listed on its designated contract market fall under exclusive federal derivatives regulation. New Jersey argues that Congress did not use the CEA to displace traditional state authority over gambling, including rules governing minors, compulsive gambling, licensing, taxation, and integrity controls.

The Supreme Court docket for application No. 25A1465 shows Justice Samuel A. Alito Jr. extended New Jersey’s filing deadline to September 3. New Jersey’s public announcement says the state filed its petition on September 2. If the Court grants review, the case would move a question that has been developing across state enforcement actions and federal injunction fights into a nationwide ruling.

Why do the Third and Ninth Circuit rulings conflict?

The Third Circuit sided with Kalshi in April in KalshiEX LLC v. Flaherty, No. 25-1922, affirming a preliminary injunction that blocked New Jersey from enforcing its gambling laws against the exchange’s sports contracts. The panel ruled 2-1 that Kalshi had shown a reasonable chance of success on its argument that the CEA preempts New Jersey law at this stage of the case. Judge Jane R. Roth dissented.

That ruling did not finally decide the merits. It kept the injunction in place while the case returned to district court, where the legal question still must be fully adjudicated. For New Jersey, that distinction matters: the state is asking the Supreme Court to intervene before final judgment because a later Ninth Circuit ruling reached the opposite result on the same core issue.

The Ninth Circuit ruled on August 28 in KalshiEX LLC v. Assad, No. 25-7516, that Kalshi had not shown a likelihood of success on its claim that federal commodities law preempts Nevada gaming regulation as applied to sports event contracts. The panel affirmed a district court order dissolving Kalshi’s preliminary injunction against Nevada officials and the Nevada Gaming Control Board.

The Ninth Circuit’s opinion treated sports wagering as a state-regulated gambling activity that was not displaced merely because the contracts were listed on a federally registered exchange. The court also discussed the CFTC’s regulation addressing event contracts involving gaming, 17 C.F.R. § 40.11, as part of its analysis. Judge Kenneth K. Lee wrote separately, emphasizing the historical role of states and Tribes in gambling regulation.

How did Kalshi’s self-certification process become the legal fault line?

Kalshi listed sports contracts through the CFTC’s product self-certification process, a pathway that lets a designated contract market certify that a product complies with the CEA and CFTC rules. CFTC guidance on listing procedures says a self-certified product may be listed after the exchange files the required submission by the close of business on the business day before listing.

That timing has become important because states argue that self-certification is not the same thing as a CFTC merits approval overriding state gambling law. The CFTC’s own Federal Register materials have distinguished product self-certification from the 10-business-day review period that applies to rules and rule amendments, undercutting a common shorthand that the agency always gets 10 business days to object before a product goes live.

Kalshi’s position is broader. It argues that once contracts are listed on a CFTC-regulated designated contract market, state gambling agencies cannot impose separate licensing and enforcement regimes that would conflict with federal oversight. New Jersey and Nevada argue that federal derivatives regulation does not convert sports wagering into an exclusively federal market when the underlying activity occurs inside states that regulate gambling.

The CFTC is central to that debate, but the Supreme Court petition is not only about agency procedure. It asks whether state gambling statutes survive when an event contract exchange frames a sports wager as a federally regulated swap or contract. That is why the Third-Ninth Circuit split matters beyond New Jersey and Nevada.

What would a Supreme Court ruling mean for prediction markets?

A ruling for Kalshi would strengthen the argument that CFTC registration gives event-contract exchanges a national path for sports markets without separate approval from every state gambling regulator. A ruling for New Jersey would leave states with authority to require licenses, taxes, and compliance obligations for sports contracts offered to people within their borders.

The commercial stakes are substantial. Barron’s reported that Kalshi recorded about $34 billion in sports volume in July 2026 and that sports accounted for 95% of the company’s 2025 revenue. Those figures help explain why state regulators, sportsbook operators, and prediction market exchanges are watching the preemption fight closely.

The case also comes as incumbent sports-betting and brokerage-adjacent firms test the boundaries between event contracts and conventional wagering. DraftKings and FanDuel operate under state-by-state sports-betting frameworks. Robinhood has explored event-contract distribution through CFTC-regulated partners. Polymarket, which has historically operated offshore, has been moving toward a U.S. return under federal supervision. The Supreme Court’s answer could shape which regulatory model has the advantage.

For states, the issue is not only market access. New Jersey’s petition frames the dispute around police powers that state gambling regulators have long exercised: preventing underage betting, supervising operators, collecting taxes, setting integrity rules, and enforcing responsible-gambling standards. If those tools are preempted for CFTC-listed sports contracts, states would lose practical control over a major category of sports wagering offered inside their borders.

Is the New Jersey case final?

No. The Third Circuit ruling in KalshiEX LLC v. Flaherty arose from a preliminary injunction, not a final judgment after trial or summary judgment. The appeals court held that Kalshi had shown enough likelihood of success to keep New Jersey enforcement blocked while litigation continued. It did not issue a final merits ruling that permanently bars New Jersey from enforcing its gambling laws.

That posture makes New Jersey’s Supreme Court request procedurally aggressive, but not impossible. The state is asking the justices to take the case now because the Ninth Circuit’s Nevada decision created a direct conflict over whether the CEA preempts state regulation of sports event contracts. Supreme Court review is discretionary, and the justices can deny the petition even when a split exists.

The preliminary-injunction posture also means the lower-court litigation can continue unless the Supreme Court steps in. In practical terms, Kalshi can point to the Third Circuit injunction in New Jersey, while Nevada can point to the Ninth Circuit decision allowing state enforcement there. That uneven map is exactly what New Jersey says requires a national answer.

What happens next?

The next procedural step is Supreme Court docketing and briefing on New Jersey’s certiorari petition. Under the Court’s ordinary rules, Kalshi would have an opportunity to file a brief in opposition, and New Jersey could reply before the justices decide whether to grant review.

If the Court denies the petition, the Third Circuit and Ninth Circuit rulings will continue to govern their respective regions at the preliminary-injunction stage while the underlying cases proceed. If the Court grants review, the case would become the first Supreme Court test of how far federal commodities law reaches into state-regulated sports betting when the wager is packaged as a prediction market contract.

The date already fixed in the Supreme Court record is September 3, 2026, the extended deadline Justice Alito set in application No. 25A1465. New Jersey says it filed on September 2. The industry’s next concrete milestone is the Court’s public docket entry for the petition and the briefing schedule that follows.