New Jersey has asked the U.S. Supreme Court to review a legal dispute over whether states can regulate prediction markets that offer sports-related contracts or whether federal oversight takes priority.

The petition follows conflicting decisions from federal appeals courts regarding companies such as Kalshi, which operate platforms allowing users to trade contracts tied to real-world outcomes. New Jersey argues that sports-related prediction contracts fall under state gambling laws, while prediction market operators maintain that they operate as federally regulated financial exchanges.

“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,” said Jennifer Davenport, New Jersey’s attorney general, in a statement.

The state’s filing challenges an April ruling from the 3rd U.S. Circuit Court of Appeals, which determined that event contracts offered through registered markets are derivatives regulated by the Commodity Futures Trading Commission (CFTC).

“So long as a company offers its sports bets on a CFTC registered market, they claim, state sports-gambling laws all fall away,” the petition said.

Kalshi has rejected New Jersey’s position, arguing that its platform operates as a financial exchange rather than a sportsbook.

“Kalshi is an open, nationwide financial exchange. It cannot be regulated by 50 different regulators. Both the Third Circuit and the District of New Jersey sided with Kalshi because the CFTC’s exclusive jurisdiction preempts state law,” said Dani Lever, the platform’s spokeswoman.

Courts Reach Different Conclusions On Prediction Markets

The Supreme Court’s potential involvement comes after separate federal courts issued conflicting rulings on the authority to regulate prediction markets.

The 3rd Circuit previously sided with Kalshi after New Jersey attempted to restrict the company’s sports-related contracts. The court found that prediction markets were distinct from traditional sportsbooks because they involve event contracts traded under federal oversight.

A later decision from the 9th U.S. Circuit Court of Appeals reached a different conclusion. That court rejected Kalshi and Crypto.com’s request for protection against action from the Nevada Gaming Control Board, finding that states could treat sports-related prediction contracts as gambling activities.

The disagreement between appellate courts has created an opening for Supreme Court review. New Jersey’s petition argues that the split between the courts requires a final decision on whether federal law prevents states from applying their gambling regulations.

“The Third Circuit’s profoundly important decision is also profoundly wrong,” the petition said.

New Jersey stated that more than 20 states are involved in legal disputes connected to prediction markets. A coalition of 44 state attorneys general has argued that sports event contracts operate as gambling products and should remain under state authority.

Prediction market companies and the CFTC have maintained that these contracts are financial instruments regulated at the federal level. The CFTC considers sports-related event contracts to be swaps, while states argue that they function as wagers on sporting outcomes.

Industry Impact Depends On Supreme Court Decision

The legal dispute has attracted attention because prediction markets have expanded rapidly across the United States. Platforms such as Kalshi and Polymarket allow users to trade contracts linked to sports, elections, entertainment, weather and other events.

Supporters of prediction markets describe them as financial exchanges where prices change based on market activity. Syracuse University sports law professor John Wolohan explained that companies argue they differ from traditional gambling operations because there is no sportsbook setting fixed odds.

“They’re a future market,” Wolohan said. “Just like you would bet on oil prices going up. Just like you’d bet on wheat futures.”

Johns Hopkins Professor of Law Stacey Lee described the dispute as a question of regulatory authority.

“It’s a dispute over who gets to make the rules,” Lee said.

She noted that opposing federal court decisions have placed the issue before the Supreme Court.

“Almost think of it as the Supreme Court being mom, and you have two kids who disagree,” Lee said. “Moms going to come in if the Supreme Court were to offer Cert, and they issue a ruling then everyone will have to get on board.”

The Supreme Court is expected to consider later in the year whether it will accept the case. A decision to hear the matter could eventually determine whether prediction market operators must comply with individual state gambling laws or continue operating under federal regulation.

Kalshi said it remains confident following New Jersey’s filing.

“We disagree with New Jersey’s filing. Kalshi is an open, nationwide financial exchange. It cannot be regulated by 50 different regulators,” Lever said, as reported by CNBC.

The company has argued that federal rules established through the Dodd-Frank Act give the CFTC exclusive authority over swaps markets. New Jersey’s petition asks whether that law prevents states from regulating sports wagers offered through federally registered markets.