States back New Jersey in Supreme Court fight with Kalshi over sports bets
Ohio, 38 other states and Washington, DC want the Supreme Court to settle whether federal derivatives law overrides state sports-gambling rules for prediction markets.
In brief
- What happened
- Ohio, 38 other states and Washington, DC filed a brief asking the US Supreme Court to hear New Jersey's case against Kalshi over sports event contracts.
- Why it matters
- Lower courts are split on whether federal derivatives law stops states applying sports-gambling laws to prediction markets, and the states say only the Supreme Court can settle it.
- Who it affects
- Prediction-market exchanges such as Kalshi and state gambling regulators: both face conflicting court rulings on whether state law applies to sports event contracts.
Thirty-nine US states and the District of Columbia are asking the Supreme Court to decide whether federal law stops states from applying their sports-gambling laws to prediction marketsPrediction marketA market where people trade contracts on the outcome of future events, such as an election result, an interest rate decision or a sports game. In the United States regulated prediction markets are overseen by the Commodity Futures Trading Commission (CFTC).Full entry in the glossary. The states, led by Ohio, filed an amicus brief (a brief from parties that are not in the case) supporting New Jersey in Case No. 26-299, Flaherty v. KalshiEX, LLC, according to the court's docket; the brief is dated in October 2026.
New Jersey's gaming enforcement director, Mary Jo Flaherty, is petitioning the court to review a Third Circuit ruling in a dispute with Kalshi, an exchange offering event contractsEvent contractA derivative contract whose payoff depends on a specified event, occurrence or value, for example whether it rains tomorrow or what an economic indicator will be. It is the product traded on prediction markets.Full entry in the glossary (contracts that pay out depending on whether a stated event happens). The brief asks the court to grant that petition.
The details
- The question: whether the Commodity Exchange Act, which gives the Commodity Futures Trading Commission (CFTC) "exclusive jurisdiction" over swaps, preempts (overrides) state sports-gambling laws.
- The states' position: prediction markets, they argue, are relabelling sports bets as swaps to escape state law. The brief says the markets began offering sports bets about two years ago. Kalshi and other markets say states cannot apply their laws to these contracts.
- The split: the brief says the federal courts of appeals are divided and lower courts "intractably divided". It cites appeals pending or decided in the Second, Fourth, Sixth, Seventh, Eighth, Ninth and Tenth Circuits, and a Massachusetts state court case.
- The CFTC: the brief describes a "regulatory turf war" between the states and the CFTC, and lists suits by the United States against several states, including New York, Illinois and Wisconsin.
Why it matters
The states argue that a ruling for the prediction markets would remove protections such as licensing, exclusion lists, minimum-age rules and spending limits. This is the states' position, not a finding. Ohio permits and regulates sports gambling; Utah prohibits it, the brief notes, as an example of differing state policy.
What's next
The court has not yet said whether it will take the case. The brief also refers to a separate petition, No. 26-344, brought by Crypto.com's derivatives exchange against Nevada.
Drafted with AI assistance from the regulator's official notice and reviewed by our editors before publication. How we work