New Jersey Attorney General Jennifer Davenport is asking the U.S. Supreme Court to decide whether prediction-market companies can offer sports wagers without complying with state gambling laws, a question that has produced conflicting federal appellate rulings.
The petition, filed Wednesday, follows Kalshi’s claim that its sports contracts are financial “swaps” governed exclusively by the Commodity Futures Trading Commission under the 2010 Dodd-Frank law. Kalshi has marketed its platform as legal sports betting in all 50 states while declining to obtain state gambling licenses.
Kalshi sued New Jersey in 2025, arguing that the state’s gambling laws were preempted. In April, a divided Third Circuit panel ruled 2-1 for Kalshi, allowing the company to offer its contracts without complying with New Jersey’s gaming regulations.
Davenport’s petition says the ruling threatens the authority of states and tribes to regulate an industry traditionally overseen at the local level. State gambling laws address underage and compulsive gambling, guard against insider trading and require operators to have the financial capacity to pay winners.
The case now presents a direct appellate conflict. The Ninth Circuit ruled Aug. 28 that sports contracts based on the outcome of a sporting event do not fall within the CFTC’s exclusive jurisdiction. The court rejected the idea that Congress used a Wall Street reform law to displace decades of gambling regulation.
Litigation over prediction-market sports betting is pending in at least 20 states, according to New Jersey, with dozens of active cases. Forty-four states, hundreds of tribes and casino interests have opposed Kalshi’s legal theory, the petition says.
The financial stakes are substantial. Sports betting generated $16.89 billion in revenue for states nationwide in 2025, excluding tribal casino sportsbooks. Kalshi reported that 95% of its revenue came from sports betting, according to Davenport’s office.
“Companies like Kalshi claim to offer legal sports betting in all 50 states, but they refuse to follow the gambling laws of any state,” Davenport said. “Congress did not silently make the sports-betting industry immune from state law.”
New Jersey also warns that a ruling for Kalshi could destabilize conventional sports betting. Federal law generally prohibits trading swaps away from CFTC-registered markets, potentially creating an argument that wagers placed at sportsbooks in Atlantic City, Las Vegas or tribal casinos are illegal unless they move on to prediction-market exchanges.
“We disagree with New Jersey’s filing. Kalshi is an open, nationwide financial exchange. It cannot be regulated by 50 different regulators. Both the Third Circuit and the District of New Jersey sided with Kalshi because the CFTC’s exclusive jurisdiction preempts state law,” said Dani Lever, a spokeswoman fro Kalshi. “While New Jersey points to a recent decision in the Ninth Circuit, that decision agreed with that key principle. Where it differed, it did so based on a regulation that’s in the process of being rewritten. We remain confident in the lower courts’ rulings, and nothing in New Jersey’s filing today changes our view.”
The state invoked the Supreme Court’s 2018 decision in Murphy v. NCAA, which struck down the federal law barring states from legalizing sports betting. New Jersey says that decision recognized that, absent direct federal regulation, states retain the power to decide whether sports gambling is allowed within their borders.
The Supreme Court has not yet decided whether to hear the case. This may be among the final actions of New Jersey’s first Solicitor General, Jeremy Feigenbaum, who is departing this week.
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November 3, 2021