Two federal appeals courts have delivered conflicting rulings on whether Kalshi’s sports betting contracts fall under federal commodities law or state gambling regulations, prompting New Jersey Attorney General Jennifer Davenport to petition the Supreme Court for resolution. The Third Circuit ruled in April that the Commodity Exchange Act likely preempts state law for sports contracts on CFTC-licensed exchanges. However, the Ninth Circuit ruled unanimously on August 28th against Kalshi in Nevada’s case, finding the broadest interpretation of federal swap definitions problematic under the major-questions doctrine.
New Jersey deliberately waited for this circuit split before filing on Wednesday, creating the legal conflict needed for Supreme Court review. The dispute affects how prediction markets and crypto-adjacent trading platforms can operate nationwide. Multiple states oppose Kalshi’s position that federal licensing exempts them from state gambling laws, while additional circuit court decisions remain pending in the Fourth Circuit.
FXnCO Insight
Traders on CFTC-regulated prediction markets face regulatory uncertainty until this reaches final resolution, with state enforcement actions now a material operational risk.
Source: Finance Magnates