States urge Supreme Court to let them regulate prediction markets

Key facts

• A coalition of 39 states and Washington D.C. filed an amicus brief at the Supreme Court.
• The brief supports New Jersey's bid to overturn a ruling that federal law preempts state gambling laws for prediction markets.
• Prediction markets like Kalshi and Polymarket allow users to bet on real-world events.
• The Third US Circuit Court of Appeals previously ruled that federal regulation of commodity trading superseded state laws.
• The Ninth US Circuit Court of Appeals ruled that states can regulate prediction markets as sports-betting, creating a circuit split.

Dozens of states have backed New Jersey in a high-stakes legal battle over the regulation of prediction markets, urging the Supreme Court to take up the case. An amicus brief, signed by state attorneys general representing 39 states and Washington D.C., supports New Jersey's petition to overturn an earlier appellate court ruling. This ruling found that federal law governing commodity trading superseded the state's gambling laws.

The case could determine whether states have the authority to regulate prediction markets, such as Kalshi and Polymarket, which are increasingly used by Americans to wager on events ranging from sports and politics to cultural happenings.

New Jersey's Attorney General Jennifer Davenport stated that the Supreme Court's intervention is needed to resolve the issue and recognize that Congress did not intend to make the sports-betting industry immune from state law. The appeal follows a recent victory for Nevada in a related case, where the Ninth US Circuit Court of Appeals ruled that states can indeed regulate prediction markets as sports-betting, creating a split with the Third Circuit's earlier decision.

The Third Circuit had previously distinguished prediction sites from traditional sportsbooks, viewing their 'event contracts' as subject to federal regulation. However, the Ninth Circuit disagreed, finding that Kalshi's sports event contracts bore the hallmarks of sports betting. Kalshi, a prominent prediction site, maintains it is a nationwide financial exchange regulated by the Commodity Futures Trading Commission (CFTC) and not subject to 50 different state regulators.