Sports Betting Rules Face Supreme Court Test Over Kalshi Contracts

The American Gaming Association (AGA) has filed a brief urging the U.S. Supreme Court to review a ruling that prevents New Jersey from enforcing its gaming laws against Kalshi sports event contracts. The filing adds a major industry voice to a dispute over whether federally registered prediction markets can offer sports-related contracts outside state and tribal gambling frameworks.

The legal question before the Court

New Jersey’s petition asks the justices to consider whether the Dodd-Frank Wall Street Reform and Consumer Protection Act displaced states’ authority to regulate sports bets offered through markets registered with the Commodity Futures Trading Commission (CFTC). The petition challenges a Third Circuit ruling in Kalshi’s favour that bars New Jersey from applying its gaming laws to the company’s sports event contracts.

The central issue is not simply how an operator labels a product, but which regulatory system applies when a contract turns on a sporting event. New Jersey wants the Supreme Court to decide whether CFTC registration removes these markets from state gambling rules, or whether states can still regulate sports-linked contracts offered within their jurisdictions.

The AGA argues that prediction-market sports contracts function as sports betting, while operating without the customer protections, state regulation and tax contributions associated with licensed sportsbooks. It says the consequences reach beyond commercial operators to tribes, consumers and the state and tribal governments that oversee gambling.

AGA warns of a split regulatory framework

The association says its members have built their businesses under a framework in which state and tribal governments regulate sports betting. In its view, the Third Circuit’s decision allows prediction markets to offer sports betting nationally without following those governments’ gaming laws, creating competitive harm for operators that must meet licensing and compliance requirements.

That argument puts the practical differences between the two models at the heart of the filing. State-regulated sportsbooks operate under jurisdiction-specific requirements, while the AGA says prediction-market contracts do not carry equivalent safeguards or deliver the same tax-revenue benefits to states.

The dispute over state authority over sports-linked prediction markets is therefore also a dispute about the limits of federal oversight. The outcome could affect how licensed operators compete with prediction markets and whether state and tribal regulators retain authority over sports betting products offered to people in their jurisdictions.

Other briefs widen the stakes

The AGA’s filing was one of several briefs submitted to the Supreme Court in support of New Jersey’s petition. A bipartisan group of 39 state attorneys general, led by Ohio Attorney General Andy Wilson, also backed the state and argued that courts are divided over whether the Commodity Exchange Act overrides state sports-gambling laws.

The attorneys general’s position is that gambling regulation falls within states’ traditional authority to protect the public. Their filing presents the disagreement among courts as a reason for the Supreme Court to address which level of government can regulate these contracts.

The NFL also filed in support of New Jersey, raising concerns about game integrity and arguing that prediction-market operators have not put in place safeguards equivalent to those used by licensed sports betting operators. The submissions add state-government and league perspectives to the AGA’s focus on competition, consumer protections and the existing regulatory framework; they do not, on their own, settle the legal question.

The broader CFTC framework for prediction markets is part of the same dispute: whether federal market registration is enough to displace state gambling laws for sports event contracts. The petition asks the Supreme Court to clarify how that federal oversight interacts with state authority over sports betting, rather than treating the question as resolved by the existence of a federal registration.

Separate legal challenges to sports event contracts, including Kalshi’s Nevada litigation, underline that the regulatory dispute extends beyond New Jersey. The cases leave operators, regulators and suppliers watching whether prediction markets will face state-by-state gambling requirements or a more uniform federal approach.

The Supreme Court must first agree to hear New Jersey’s case. The source reporting the petition says that, if the justices grant review, a decision would likely come sometime in 2027; until then, the Third Circuit ruling remains central to the New Jersey dispute.

For the industry, the decision on whether to take the case is the immediate milestone. A ruling could shape the ability of prediction markets to offer sports event contracts, the reach of state and tribal gaming regulation, and the competitive conditions facing licensed sportsbooks.