New Jersey asks Supreme Court to decide who regulates sports betting on prediction markets

New Jersey is asking the U.S. Supreme Court to settle, once and for all, how sports betting on prediction markets should be regulated as tensions between states and the federal government continue to escalate.

On Wednesday, New Jersey Attorney General Jennifer Davenport filed a 332-page petition for a writ of certiorari, a formal request asking the Supreme Court to review a lower court’s decision. The petition stems from a case that began last year, when New Jersey sent prediction markets platform Kalshi a cease-and-desist letter alleging that the company was violating the state’s gambling laws.

Kalshi subsequently sued New Jersey, and the case eventually reached the U.S. Court of Appeals for the Third Circuit, which ruled in Kalshi’s favor.

Now, New Jersey is asking the Supreme Court to take up the case. The justices will have to decide whether to grant the petition and hear the dispute.

"States have long adopted careful laws to regulate gambling, including to prevent compulsive gambling, gambling by minors, and insider trading on sports games," Davenport said in a statement. "We’re calling on the Supreme Court to resolve this issue and recognize that Congress did not silently make the sports-betting industry immune from state law."

A Kalshi spokesperson said the platform disagrees with New Jersey's filing.

"Kalshi is an open, nationwide financial exchange. It cannot be regulated by 50 different regulators," the spokesperson said in an emailed statement.

Multiple legal fights

The Commodity Futures Trading Commission and states have been embroiled in multiple legal fights over the past year. State officials have increasingly raised concerns about prediction markets, specifically those offering sports contracts. States argue those can amount to gambling and so violate their gaming laws.

On the flip side, the CFTC, which oversees derivatives markets under the Commodity Exchange Act, argued that the agency has "exclusive jurisdiction." Under CFTC Chair Michael Selig, the agency has gone so far as to sue several states and also proposed a framework for regulating prediction markets.

However, Kalshi was dealt a blow last week after an appeals court sided with a lower court's ruling that the company failed to show that the CFTC preempts Nevada’s authority to regulate sports betting.

The CFTC did not immediately respond to a request for comment.