NJ AG Asks US Supreme Court to Stop Kalshi from Evading State Gambling Laws
New Jersey Attorney General Jennifer Davenport has asked the U.S. Supreme Court to weigh in on whether federally regulated prediction markets can offer sports wagers without following state sports-gambling laws.
Litigation on this issue has arisen across at least 20 states with dozens of active suits pending and the gambling laws of several states currently enjoined by federal courts.
On Wednesday, Davenport filed a petition with the U.S. Supreme Court seeking its review of the legality of the business model of offering sports wagers self-certified by Kalshi with the Commodity Futures Trading Commission (CFTC) without following state laws.
Kalshi is the first federally regulated financial exchange and prediction market in the United States where users trade on the outcomes of real-world future events, including sports.
“Companies like Kalshi claim to offer legal sports betting in all 50 States, but they refuse to follow the gambling laws of any state,” Davenport said in a statement on Wednesday. “These companies have no right to offer their sports bets without following state law, which is why dozens of States across the ideological spectrum have opposed them.”
Davenport noted that states have adopted careful laws to regulate gambling, including to prevent compulsive gambling, gambling by minors, and insider trading on sports games.
“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,” Davenport said.
“Kalshi markets itself as the ‘first app for legal sports betting in all 50 States,’ including for wagering on NCAA games held in New Jersey and participated in by New Jersey teams, which is impermissible under New Jersey’s Constitution,” said Division of Gaming Enforcement interim Director Mary Jo Flaherty in a statement Wednesday.
“But Kalshi does not abide in any way with our state’s gaming laws,” Flaherty said. “This is a states’ rights issue. In New Jersey, gaming is prohibited by its Constitution, other than for exceptions approved by New Jersey voters. In this case, the state is upholding the will of New Jerseyans regarding the manner in which gaming can be conducted.”
The stakes are exceptionally high. In 2025, legalized sports betting generated $16.89 billion in revenue for states nationwide, not even including sportsbooks in tribal casinos. Indeed, 95% of Kalshi’s revenue in 2025 came from sports betting.
At issue in this case is whether the States can still regulate this major economic industry, or whether the sole regulatory body for companies like Kalshi is the CFTC, which has admitted that it is not a gaming regulator and has no specialized expertise in overseeing gaming, Davenport said. That is why 44 states, hundreds of tribes, and casinos have all already weighed in to oppose Kalshi’s and the other prediction markets’ litigation theories.
At issue is whether Congress, by enacting the 2010 Dodd-Frank Wall Street Reform and Consumer Protection Act, intended to federalize a multi-billion-dollar sports-wagering industry. Kalshi claims that it did. In 2025, the company sued New Jersey, claiming that it could offer sports gambling in the state without following the state’s rigorous gambling laws because its sports wagers are actually “swaps” that can only be regulated by the CFTC.
In April 2026, the 3rd U.S. Circuit Court of Appeals, by a 2-1 vote, ruled in Kalshi’s favor, holding that New Jersey’s state gambling laws are preempted.
The vast majority of federal and state courts around the country have disagreed and instead overwhelmingly rejected the argument that such sports bets have a loophole from state law. The latest win for the states came Aug. 28, when the 9th U.S. Circuit Court of Appeals explicitly disagreed with the 3rd Circuit and ruled that sports bets on outcomes of a sporting event do not fall within the exclusive jurisdiction of the CFTC.
New Jersey co-led an amicus brief in that case, joined by 39 other jurisdictions. The 9th Circuit cited that amicus brief in holding “it is implausible that Congress intended to allow the CFTC to engage in the national regulation of gambling based on expansive definitions of the words ‘event’ and ‘associated with’ in a Wall Street reform bill.”
The petition also emphasizes the consequences of a ruling in Kalshi’s favor. Because federal law prohibits trading swaps off CFTC-registered markets, a victory for Kalshi would mean that all sports gambling off such CFTC-registered markets would seemingly become illegal even if state law allows it. Such an outcome would make sports wagers at classic sportsbooks like brick-and-mortar casinos — whether in Atlantic City, Las Vegas, or on tribal lands — illegal, and throw the entire industry into turmoil.
This is not New Jersey’s first time seeking review on a critical state gaming issue. Eight years ago, the U.S. Supreme Court ruled for New Jersey in Murphy v. NCAA, explaining that if Congress elects not to “regulate sports gambling directly,” then “each state is free to act on its own.” Kalshi’s model, which offers sports bets in all 50 states, would upend the promise that each state could decide whether to allow sports wagering within its borders.