New Jersey petitions Supreme Court to block Kalshi from sidestepping state gambling laws

State officials say Kalshi must follow NJ’s gambling laws. The company says only federal regulators have authority over its sports contracts.

New Jersey officials asked the U.S. Supreme Court Wednesday to step into a nationwide fight over whether prediction markets such as Kalshi must follow state sports-gambling laws.

The dispute has pitted states against an industry that says it should answer only to the federal government, and has the backing of the Trump administration.

Davenport’s petition asks the Supreme Court to decide who can regulate sports contracts offered by Kalshi and other prediction markets. New Jersey officials say the contracts are sports wagers subject to state gambling laws, while Kalshi says they are financial contracts overseen exclusively by the Commodity Futures Trading Commission.

“Kalshi does not abide in any way with our State’s gaming laws,” said Mary Jo Flaherty, interim director of the New Jersey Division of Gaming Enforcement. “This is a states’ rights issue. In New Jersey, gaming is prohibited by its Constitution, other than for exceptions approved by New Jersey voters.”

Kalshi spokesperson Dani Lever criticized the petition.

“We disagree with New Jersey’s filing,” Lever said. “Kalshi is an open, nationwide financial exchange. It cannot be regulated by 50 different regulators.”

In January 2025, Kalshi began offering “sports event contracts” that allow users to buy and sell contracts tied to the outcomes of sporting events. Kalshi marketed itself as “the first app for legal sports betting in all 50 states,” and sports-related contracts quickly became the platform’s main business.

Over 90% of Kalshi’s trades in 2025, representing 95% of its revenue, were sports-related, according to the 9th U.S. Circuit Court of Appeals.

In March 2025, the New Jersey Division of Gaming Enforcement sent the company a cease-and-desist letter for facilitating unauthorized sports betting.

Kalshi sued New Jersey, arguing that its sports event contracts are not gambling but swaps regulated solely by the federal government. Swaps are financial instruments whose value is tied to another asset, event, or outcome.

In 2020, the Commodity Futures Trading Commission authorized Kalshi to operate as a “designated contract market,” a federally regulated exchange for derivatives. Kalshi argues that the Commodity Exchange Act gives the commission exclusive authority over contracts traded on such exchanges.

In April 2025, a federal judge temporarily blocked New Jersey from enforcing its gambling laws against Kalshi while the case proceeds. The 3rd U.S. Circuit Court of Appeals upheld that order in a 2-1 decision in April 2026, finding that Kalshi was likely to prove that federal law overrides the state’s gambling rules.

But on Aug. 28, the 9th U.S. Circuit Court of Appeals ruled in a similar Nevada case that the state could enforce its gambling laws against Kalshi’s sports contracts.

The 9th Circuit agreed with the broader principle that the Commodity Futures Trading Commission has exclusive jurisdiction over swaps traded on designated contract markets. But it concluded that Kalshi’s sports contracts did not qualify as swaps under the relevant law and regulations. In reaching that conclusion, the court disagreed with the 3rd Circuit’s interpretation of the statutory language at issue.

The New Jersey attorney general says the conflicting rulings create a circuit split that the Supreme Court should resolve. Kalshi disputes that characterization.

“While New Jersey points to a recent decision in the Ninth Circuit, that decision agreed with that key principle,” Lever said. “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.”

At least 20 states are involved in legal battles with the company over its sports contracts. Forty-four states signed a letter to the Commodity Futures Trading Commission arguing that states retain the authority to regulate sports betting on prediction markets.

“These companies have no right to offer their sports bets without following state law, which is why dozens of States across the ideological spectrum have opposed them,” Davenport said in a statement. “States have long adopted careful laws to regulate gambling, including to prevent compulsive gambling, gambling by minors, and insider trading on sports games.”

The Trump administration has sided with Kalshi. The Commodity Futures Trading Commission, led by Trump appointee Michael Selig, has filed lawsuits against several states and friend-of-the-court briefs in other cases arguing that the agency has exclusive authority over federally regulated prediction markets. Donald Trump Jr., the president’s son, is a paid strategic adviser to Kalshi.

Prediction markets also have faced scrutiny over insider trading. Last week, the commission ordered a former White House teleprompter operator to pay $172,539 for using advance access to Trump’s speeches to trade contracts on Kalshi. The agency credited Kalshi with assisting in the investigation.

An analysis of state data by RG.com shows how quickly sports betting has grown since New Jersey legalized it in 2018. The total value of bets placed rose from about $4.58 billion in 2019 to $12.77 billion in 2024.

A Federal Reserve Bank of New York staff report found that legalizing mobile sports betting increased sportsbook spending and was associated with lower credit scores and higher delinquency rates. Increases in auto loan and credit card delinquencies were concentrated among people younger than 40.

Business Insider also reported that bankruptcy attorneys were seeing more clients in their 20s and 30s with tens of thousands of dollars in debt tied to online gambling.

Filing a petition does not mean the Supreme Court will hear the case. The court only grants about 1% of the petitions it receives each year.