The Breaking News: New Jersey’s Supreme Court Petition
New Jersey has asked the US Supreme Court to intervene in a widening regulatory battle over prediction markets. Seeking to preserve states’ authority to police sports wagering offered through platforms such as Kalshi, the state filed its appeal on Wednesday, September 2, 2026. The filing makes New Jersey the first state to ask the Supreme Court to shut down prediction market platforms operating within its borders.
New Jersey Attorney General Jennifer Davenport said the platforms should not be able to avoid state requirements simply because their products are structured as event contracts. She stated that “dozens of states across the ideological spectrum” have opposed allowing the companies to offer sports bets without complying with state law. New Jersey contends this outcome conflicts with the Supreme Court’s 2018 decision in Murphy v. NCAA, which recognized state authority over sports gambling after striking down the federal Professional and Amateur Sports Protection Act.
What is a “Circuit Split” and Why it Matters
The Supreme Court petition arrives as federal appellate courts have taken opposing positions on the central regulatory question. This disagreement between appellate courts increases the significance of New Jersey’s request for Supreme Court review because companies operating nationally could otherwise face different regulatory regimes depending on the jurisdiction.
The U.S. Court of Appeals for the Third Circuit ruled on April 6, 2026, that New Jersey could not regulate Kalshi’s sports-event contracts. The appellate panel found that Kalshi was likely to succeed on its preemption claim, finding that federal commodities law gave the U.S. Commodity Futures Trading Commission (CFTC) exclusive jurisdiction over the products. The Third Circuit’s decision upheld a preliminary injunction that prevented New Jersey from enforcing its regulations against Kalshi.
But the Ninth Circuit reached a different conclusion just last week, on August 28, 2026, in a case involving Nevada. The Ninth U.S. Circuit Court of Appeals ruled unanimously that Nevada can ban the prediction market platform Kalshi from operating in the state. The court said federal commodities law was unlikely to displace Nevada’s authority to require a gambling license for sports-event contracts.
Judge Ryan D. Nelson wrote for a three-judge panel, putting it plainly: “Congress did not take a wrecking ball to all sports gambling regulations built up over decades by federal, state, and tribal governments when it amended the [Commodity Exchange Act]”. As one legal expert noted, the Ninth Circuit has now teed up a circuit split that calls out for resolution by the Supreme Court.
Prediction Markets vs. Traditional Sportsbooks
The broader dispute centers on how prediction-market products should be classified. Kalshi, which is based in New York, characterizes its products as federally regulated financial contracts. Kalshi and the CFTC have argued that sports event contracts can fall within the federal framework governing swaps and designated contract markets.
However, state officials contend that sports-related contracts function as wagers and therefore should comply with state gaming rules. The Ninth Circuit rejected Kalshi’s argument in the Nevada dispute, concluding that the substance of the sports event contracts offered on Kalshi’s designated contract market is sports gambling, regardless of whether Kalshi calls them swaps.
The panel offered an example to illustrate the distinction: Whether the Super Bowl happens is an occurrence Kalshi could legitimately contract on; who wins it is gambling, regardless of what label gets attached to it. Furthermore, the ruling noted that Kalshi’s own marketing copy advertised the platform as “the first app for legal sports betting in all 50 states”.
The Threat to Consumer Protection
New Jersey’s core argument is that Kalshi has found a federal back door into sports betting by registering its sports event contracts with the CFTC and then claiming that registration displaces state gambling regulation. The state asserts it has regulated gambling for more than a century and that platforms like Kalshi and Polymarket are attempting to evade state oversight by labeling their wagers as derivatives.
New Jersey and other states have argued that prediction-market operators are offering sports wagering without obtaining licenses required under local law. The petition highlights what New Jersey describes as an untenable result: a company could offer sports betting to state residents without age verification, responsible gambling protocols, or the licensing fees that fund problem gambling programs, simply by registering with a federal commodities regulator. These state regulations include crucial consumer protections and age restrictions, including prohibitions on betting by people younger than 21.
What’s Next for the Industry
The question presented in the petition frames the dispute narrowly: whether Dodd-Frank preempted states from regulating sports bets that occur within their jurisdictions if those bets are offered on CFTC-registered markets. New Jersey argues the answer is no, contending that Congress never intended the 2010 financial reform law to strip states of their traditional authority over gambling.
The state’s petition argues that the Third Circuit’s reasoning would allow any CFTC-registered exchange to offer sports betting in any state without obtaining a gambling license, effectively nullifying state gaming laws nationwide. As the legal battle unfolds, the resolution of this direct conflict between two circuit courts on the same legal question holds significant implications for the rapidly expanding prediction-market industry, where customers trade contracts tied to the outcome of future events, ranging from elections to sporting contests.
Sources: PYMNTS (CPI), OneBullEx, Gaming America, and Mashable.
