By Nate Raymond
Sept 2 (Reuters) – New Jersey authorities on Wednesday asked the U.S. Supreme Court to resolve whether states have the power to police sports betting that occurs on prediction markets operated by Kalshi and competing platforms.
The state asked the Supreme Court to overturn an appellate court’s decision in April holding that the U.S. Commodity Futures Trading Commission has exclusive jurisdiction over the sports-related event contracts that Kalshi allows people to trade on its platform.
“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,” New Jersey Attorney General Jennifer Davenport, a Democrat, said in a statement.
New York-based Kalshi did not immediately respond to a request for comment.
Kalshi, which in a recent funding round was valued at $22 billion, has been at the center of an escalating legal battle over the ability of state gaming regulators to police companies in the fast-growing prediction markets industry.
States argue that firms like Kalshi are operating without required state licenses, in violation of gaming laws, including bans on wagers by those under 21.
Under Republican President Donald Trump’s administration, the CFTC has shared the companies’ position that trading on prediction markets falls exclusively under the agency’s jurisdiction.
Davenport is asking the Supreme Court to overturn a 2-1 decision by the Philadelphia-based 3rd U.S. Circuit Court of Appeals in Kalshi’s favor that concluded that the federal Commodity Exchange Act likely preempted New Jersey’s laws.
New Jersey took its case to the nation’s highest court just days after a different federal appeals court sided against Kalshi, ruling that Nevada gaming regulators could not be blocked from requiring the company to hold a gaming license to allow users to bet on sports outcomes.
Those conflicting appellate court rulings increased the possibility that the Supreme Court could be forced to step in and resolve the issue, which is at the center of numerous other court cases nationwide. At least four states — Nevada, Massachusetts, Michigan and Washington — have won court orders restricting Kalshi’s activities.
New Jersey argues the 3rd Circuit’s holding rests on the incorrect premise that Congress, in adopting the Dodd-Frank Act following the 2008 financial crisis, silently shifted authority over sports wagering away from states to the CFTC when it was directed to regulate “swaps,” a type of derivative contract.
“At the very least, Dodd-Frank is not nearly clear enough to transfer authority over a multi-billion-dollar sportsgaming industry to a federal regulatory agency with no gambling expertise,” the state’s lawyers wrote.
(Reporting by Nate Raymond in BostonEditing by Nick Zieminski)
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