New Jersey takes Kalshi sports betting dispute to Supreme Court
Battle over regulatory authority between states and federal agencies escalates
1New Jersey's legal move
New Jersey has petitioned the US Supreme Court to review a split Third Circuit decision that blocked the state from enforcing its wagering laws against KalshiEX LLC. The state questions whether the Dodd-Frank Act prevents states from regulating sports contracts offered through CFTC-regulated markets. New Jersey cited the 2018 Murphy v. NCAA ruling where justices affirmed states' rights to regulate sports betting.
2Kalshi's sports betting products
Kalshi launched sports event contracts in January 2025, allowing customers to take 'yes' or 'no' positions on outcomes ranging from tournament winners to player performances. New Jersey's Division of Gaming Enforcement sent a cease-and-desist letter in March 2025, also targeting Robinhood for allegedly offering unauthorized sports wagering. The regulator demanded voiding wagers from New Jersey residents.
3Federal court proceedings
Kalshi went to federal court after New Jersey's action. A district judge blocked enforcement, and the Third Circuit later agreed the contracts were swaps under CFTC's exclusive authority. During appeals, judges questioned New Jersey's position while noting the broad federal definition of swaps. This created uncertainty about state regulatory powers.
4Ninth Circuit's contrary ruling
On August 28, the Ninth Circuit reached the opposite conclusion in Kalshi v. Assad, calling Kalshi's offerings 'sports gambling regardless of whether Kalshi calls them swaps.' The court allowed Nevada to enforce gambling laws during litigation and found Kalshi unlikely to succeed on federal preemption arguments. The decision highlighted that Kalshi self-certified its contracts without CFTC approval.
5Legal uncertainty and implications
New Jersey argues conflicting appellate decisions now affect at least 39 lawsuits across 20 states. Kalshi maintains its position as a national financial exchange that can't be regulated by 50 different regulators. The split between circuit courts creates nationwide uncertainty about who controls these emerging sports markets.
6Kalshi's defense
Kalshi spokesperson Dani Lever stated: 'We disagree with New Jersey's filing. Kalshi is an open, nationwide financial exchange that cannot be regulated by 50 different regulators.' The company emphasized that both the Third Circuit and District Court sided with Kalshi based on CFTC's exclusive jurisdiction preempting state law.
7Split between federal courts
The contradictory rulings between the Third and Ninth Circuits have created regulatory uncertainty over sports prediction markets. New Jersey is asking the Supreme Court to resolve who controls these markets. The state strengthened its petition by citing the need to resolve conflicts between federal appeals courts on this critical issue.
8Industry significance
This case could set a crucial precedent for future regulation of sports betting and financial derivatives. The power struggle between federal and state regulators may have broad implications for digital assets and innovative financial products. The outcome will shape the balance between fintech innovation and consumer protection in emerging markets.