Conflicting rulings leave the industry facing different legal standards while New Jersey seeks Supreme Court review.
Federal appeals courts have reached opposite conclusions on whether prediction market operators like Kalshi fall under federal commodities law or state gambling regulation, a split now headed toward the Supreme Court.
In August, the Ninth Circuit ruled against Kalshi in a case brought by Nevada, siding with the state's authority to regulate the contracts as gambling products. The court's reasoning held that calling a sports bet a swap does not make it one. That outcome followed an April ruling in which the Third Circuit sided with Kalshi in a related New Jersey case, finding that federal preemption under Dodd-Frank's swap classification applied instead.
New Jersey has petitioned the Supreme Court for review following the reported split. The Court has not said whether it will hear the case, and the timing of that decision remains uncertain.
A national rule remains unsettled
The stakes extend beyond Kalshi. A circuit split on whether federal commodities law preempts state gambling authority over event contracts leaves the entire prediction markets industry operating under unsettled law until the Supreme Court resolves the conflict, or Congress does so through legislation such as the CLARITY Act, whose own declining passage odds are its own story this week.