New Jersey has petitioned the US Supreme Court for the right to classify prediction markets such as Kalshi and Polymarket as gambling. The two-year legal fight now reaches the Justices for the first time.

The petition was filed on Wednesday. A ruling by the Supreme Court would settle whether this billion-dollar industry is regulated by state gaming regulators or by a single federal agency. The outcome could also shape how other novel financial products that blur the line between trading and wagering—such as sports and political event contracts—are classified going forward, since the legal distinction between a regulated derivative and a bet is precisely what the competing courts disagree on.

Davenport wants Congress read narrowly, not the CFTC

The petitioners ask the justices to overturn a Third Circuit court based in Philadelphia, which ruled that the Commodity Futures Trading Commission (CFTC) has exclusive powers to regulate platforms like Kalshi and Polymarket, overriding New Jersey's gambling laws.

Jennifer Davenport, the state Attorney General and a Democrat, says the case is simply about stopping federal overreach. "We're calling on the Supreme Court to resolve this issue and recognize that Congress did not silently make the sports-betting industry immune from state law," she said in a statement.

In the filing, her office argues that the Commodity Exchange Act did not empower the CFTC to act as "the sole regulator of sports gambling in this country," adding that matters pertaining to health and safety have always rested within the jurisdiction of the states.

A circuit split the justices may not be able to overlook

New Jersey's timing is notable. Its petition comes barely a week after the Ninth Circuit's 3-0 ruling allowing states to regulate prediction markets as sports betting, siding with Nevada.

The Ninth Circuit's opinion is at odds with the Third Circuit, which held that Kalshi's "event contracts" are legally different from sportsbooks and should be under federal oversight.

The issue now divides the two appeals courts, and legal experts believe the split is enough reason for the Supreme Court to step in. Circuit splits are among the most common reasons the Supreme Court agrees to take a case, because they leave federal law applied differently depending on where a platform operates. The justices are likely to decide this fall whether to hear the case, and if they do, a ruling is expected next summer.

Kalshi, the most popular prediction site in the country, is also named in New Jersey's petition. The company says it expects to win the case.

"Kalshi is an open, nationwide financial exchange. It cannot be regulated by 50 different regulators," spokeswoman Dani Lever said.

Casinos, tribes and 44 states join forces against the platforms

The opposition spans the political spectrum. A coalition of 44 states has described the prediction sites as unlicensed sportsbooks that evade the consumer-protection rules and tax obligations that traditional betting carries.

Native American tribes and established gaming industry operators have joined forces with the states. Operators like FanDuel and DraftKings consider the prediction sites competitors that cut corners. The alignment is notable because states, tribes, and licensed operators all collect revenue under existing gambling frameworks, while the platforms currently operate under federal market rules rather than state gaming licenses and taxes.

Currently, three states—Nevada, Michigan, and Washington—have secured court orders pausing Kalshi's sports contracts. Sports wagers account for over 80% of weekly volume, making them central to the business.

Why the stakes keep increasing

The money involved has grown rapidly. Cryptopolitan reported that total prediction-market volume jumped from $2 billion in August 2025 to $38.5 billion, a 1,900% increase.

Kalshi allows crypto deposits and withdrawals, and Polymarket focuses on on-chain stablecoin guarantees, so a state-by-state shutdown would affect the crypto markets. A patchwork outcome would also leave the platforms facing divergent rules across jurisdictions, the exact scenario Kalshi's statement warns against.

CFTC Chairman Mike Selig, a Trump appointee, says his agency has exclusive jurisdiction over prediction markets and has pushed for them to grow. That sets up a clash between the federal government and dozens of states.

Source: Politico