22 September 2026
The U.S. Supreme Court has been asked to decide whether prediction-market platforms, such as Kalshi, can offer sports wagers without complying with state gambling laws. The case pits New Jersey, which argues that prediction markets are effectively gambling subject to long-standing state regulation, against Kalshi, which says its contracts are financial "swaps" governed exclusively by the Commodity Futures Trading Commission (CFTC) under federal law.
At the heart of the dispute is a conflict between federal appellate courts over the regulation of prediction markets. In 2023, the Third Circuit had blocked New Jersey from enforcing its sports-gambling laws against Kalshi, while the Ninth Circuit later ruled that Nevada may regulate Kalshi’s sports contracts. New Jersey's Supreme Court petition seeks to resolve this split, arguing that prediction markets are gambling and should remain under state control.
The Supreme Court will grapple with a momentous question: are sports-event contracts regulated as gambling under state law, or as derivatives and swaps under federal law? A ruling in favor of the CFTC over state regulators could upend the landscape of regulated gambling, opening the door to additional financial products masquerading as betting.
We look to a game-changing 2018 ruling for guidance. The Supreme Court struck down the federal ban on state-sanctioned sports gambling in Murphy v. NCAA, effectively letting states decide the issue. Mirroring that outcome, the Supreme Court of India upheld the state's power to ban online games with money staked on them.
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Nearly a decade later, the Court could again find itself weighing the age-old quandary of when a wager about future outcomes, like game scores or election results, violates gambling laws. While political forecasting markets are legal, courts have kept prediction markets at arm's length from mainstream gambling businesses. And they have largely depoliticized gambling-related bans, applying them to sports and esports, fantasy leagues, and video wagering.
Moreover, the Court may weigh the broader regulatory impact. A decision could determine whether states, Native American tribes, casino interests, or the CFTC serve as the main regulators of prediction markets. And it could draw new lines between popular gaming platforms like DraftKings and FanDuel and actual financial instruments.
However, the stakes in the case go beyond sports, political outcomes, and ponies. Prediction markets are big business, putting millions of bets in play on everything from GOP primaries to the World Series MVP. And they hope to expand from sports to a wider range of events. If anchored firmly to financial law, the platform operators behind platforms like Kalshi may enjoy deregulation - letting them tap into traditional lottery wagering, enticing bettors from horse racing, and stretching their marketplaces to encompass all kinds of rousing, nail-biting action from tastes high to low.