New Jersey Asks Supreme Court to Rule Kalshi Sports Bets Are Gambling, Not Swaps

New Jersey, which regulates gambling and bans all betting on college sports, has petitioned the US Supreme Court in its ongoing dispute with prediction-market platform Kalshi. The state has been unable to enforce its own gambling laws against the company, which operates as an exchange registered with the federal Commodity Futures Trading Commission (CFTC).

The petition asks the court to decide whether the 2010 Dodd-Frank Wall Street Reform and Consumer Protection Act preempts states from regulating sports bets within their jurisdictions when those bets are offered through CFTC-registered markets. New Jersey argues that if Kalshi is correct that it can offer sports bets on federal exchanges regardless of state law, companies could easily sidestep every state sports-gambling statute simply by registering with the CFTC. The state has called the 3rd Circuit's ruling in Kalshi's favor "profoundly wrong."

Are sports bets "swaps"?

At the core of the dispute is a legal question: whether the federal definition of a "swap" covers sports bets. The Dodd-Frank Act amended the Commodity Exchange Act to give the CFTC exclusive jurisdiction over swaps, defined as agreements tied to an event or contingency with a potential financial, economic, or commercial consequence.

Courts have split on this question. Third Circuit judges ruled that a sports event's outcome can indeed carry financial, economic, or commercial consequences, pointing to stakeholders such as sponsors, advertisers, TV networks, franchises, and local communities.

The Trump administration has backed Kalshi in its disputes with states, and the CFTC itself has sued states to block them from regulating prediction markets. Donald Trump Jr. serves as an advisor to both Kalshi and Polymarket, and his venture capital firm has invested in Polymarket. Despite Trump's recent record of success before the Supreme Court, its conservative majority is no guarantee of a win for Kalshi — the three 9th Circuit judges who unanimously ruled against the company were all Trump appointees.