The multibillion dollar battle over the future of prediction markets has reached the Supreme Court.
New Jersey on Wednesday asked the high court to weigh in on a legal battle that has pitted dozens of states against the prediction market sector, which is strongly backed by the Trump administration.
At issue is who exactly should regulate sports betting on the prediction market platform Kalshi: federal commodities regulators, as the company insists, or state gambling authorities?
While prediction market sites like Kalshi offer wagering on everything from what an executive says on an earnings call to the outcome of an election, sports bets are the most popular by far, typically representing 80% or more of the platforms' weekly trading volume.
The request from New Jersey officials follows split decisions by federal appeals courts. In April, the Third Circuit found that the Commodity Futures Trading Commission has the exclusive right to oversee the prediction market sector in a case brought by Kalshi against New Jersey. But last week, the Ninth Circuit issued the opposite opinion in a case involving Nevada, ruling that states, not the federal government, should regulate the booming industry.
In its petition to the high court, lawyers for the New Jersey Attorney General's Office argued that the law at issue, the Commodity Exchange Act, does not allow prediction market operators to ignore state law.
"States have always maintained the primary police powers for health and safety matters, including for gambling," the attorneys wrote. "Nothing in the Act gives the CFTC unprecedented authority to become the sole regulator of sports gambling in this country, much less gives companies a get-out-of-50-state-laws-free pass by self-certifying their bets on a CFTC-registered market."
In response, Kalshi said federal regulations covering financial investments apply to its markets and override state laws.
"Kalshi is an open, nationwide financial exchange. It cannot be regulated by 50 different regulators," said Kalshi spokeswoman Dani Lever. "We remain confident in the lower courts' rulings, and nothing in New Jersey's filing today changes our view."
State-regulated sports betting services, like FanDuel and DraftKings, which are subject to billions of dollars in state taxes, have been among the prediction market industry's antagonists, viewing the insurgent sites as fast-growing rivals that are cutting corners.
If the Supreme Court accepts New Jersey's petition, arguments could be scheduled this fall, with the case expected to be decided by next summer.
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