New Jersey is urging the Supreme Court to consider the regulation of prediction markets, a move that could enable the state to shut down platforms such as Kalshi and Polymarket. New Jersey Attorney General Jennifer Davenport filed a petition with the Supreme Court on Wednesday, seeking a review of a lower court's ruling that prediction markets are exclusively under federal regulation.
"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 stated. "States have long adopted careful laws to regulate gambling, including to prevent compulsive gambling, gambling by minors, and insider trading on sports games."
Prediction markets, which have grown rapidly in popularity, allow users to wager on outcomes ranging from sports and pop culture to political events. Critics contend these platforms function as unlicensed sportsbooks, circumventing state laws and taxes, and providing access to individuals legally barred from other forms of sports betting.
The federal Commodity Futures Trading Commission (CFTC) currently oversees the industry. However, a coalition of state attorneys general, Native tribes, and the casino industry are advocating for prediction markets to be subject to the same state regulations as casinos and sportsbooks.
The Supreme Court is expected to announce by the fall whether it will hear the case, with a decision potentially arriving next summer. State-level oversight could significantly impact these companies, which report billions of dollars in weekly trading volume.
Both the prediction market companies and former President Donald Trump have opposed state regulation. Trump previously stated on social media that it is "critically important that the CFTC’s exclusive authority over Prediction Markets is maintained, and that they will thrive."
Kalshi, which controls an estimated 90% of the U.S. prediction market share, argues that its operations as a nationwide financial exchange cannot be regulated by individual states. A spokesperson for Kalshi reiterated the company's stance, stating, "Both the Third Circuit and the District of New Jersey sided with Kalshi because the CFTC’s exclusive jurisdiction preempts state law."
The legal landscape for prediction markets is currently divided. While the Third U.S. Circuit Court of Appeals previously upheld a ruling preventing New Jersey from regulating Kalshi, siding with the platform's distinction from sportsbooks due to its "event contracts," the Ninth U.S. Circuit Court of Appeals recently ruled that states can regulate these markets as sports-betting platforms. The Ninth Circuit concluded that "Kalshi’s sports event contracts have the hallmarks of sports betting."
Sports bets and parlays constitute 80% of Kalshi's trading volume. Concerns have been raised that prediction sites allow individuals under 21 to participate, as they are regulated as financial markets, accessible to those 18 and older. A CNN analysis indicated that individuals aged 18 to 21 traded approximately $5.4 billion on Kalshi this year, with about $3.9 billion in sports and parlays.
Advocates for prediction markets argue that 18-year-olds already have access to other financial markets. Kalshi has implemented safeguards such as deposit limits and warnings for users exhibiting risky behavior. The CFTC, under a Trump administration appointee, has generally adopted a favorable approach to prediction markets, dismissing requests from sports leagues to raise the minimum trading age and intervening against states attempting to ban these sites.
Donald Trump Jr., an investor and adviser to Polymarket and an adviser to Kalshi, has stated he does not lobby federal officials on behalf of these platforms. The New York Post sought comment from the White House and Polymarket.