Is it possible that state-licensed sportsbooks and casinos have been violating federal law for 16 years? Or that any company could bypass state gambling law by registering with the Commodity Futures Trading Commission (CFTC)?
Those are key questions New Jersey Attorney General Jennifer Davenport posed Wednesday in her petition asking the U.S. Supreme Court to take up the state’s case vs. Kalshi as one that could determine the future of prediction markets — in particular sports event contracts. Davenport filed the petition days after the Ninth Circuit Court of Appeals ruled in favor of Nevada in a case against Kalshi. In April, the Third Circuit ruled in favor of Kalshi in a case against New Jersey.
There is no guarantee that the court, which last entertained an issue related to sports betting in 2018 and gave states the right to regulate it, will take the case. And even if it does, courts run on their own timelines, making it unknown when a decision might come.
In fact, the Supreme Court could deny the New Jersey petition but still eventually accept a similar case, constitutional law professor Bob Jarvis said. Cases between Kalshi and states are now sitting in a handful of other circuit courts, including the Second, Fourth, and Sixth.
The Supreme Court “has also been known to sit there and let things percolate in the circuits,” said Jarvis, a professor of law at Nova Southeastern University. “In that scenario, they could keep denying petitions until they are ready.”
And the wait could be long. Jarvis estimates that given where the circuit court cases currently sit, some opinions in them may not be issued until 2028. The Supreme Court’s decision of when and whether to take up the matter all comes down to the level of urgency the justices attach to the issue.
“I don’t think the Supreme Court will be willing to wait that long,” he said. “But while I think the court will move on this, there is a world where it sits.”
Key principles
Whether or not gambling companies across the U.S. have been violating federal law since 2010 isn’t the question that needs to be answered. Rather, it would be the consequence of how the text of the Dodd-Frank Wall Street Reform and Consumer Protection Act is interpreted.
Two principles at the heart of the more than 20 court cases playing out across the country involve determining what is a “swap” and whether federal law preempts state gambling laws. Courts have been split on the answers to these questions, but as New Jersey’s attorney general, Davenport maintains that sports event contracts do not fit the definition of a swap and that federal law clearly gives states “police power” over gambling.
She wrote that Kalshi, which has been offering sports event contracts “in all 50 states” since early 2025, “built an entire business model on the claim that Congress silently displaced the States’ authority over sports wagering” with the Dodd-Frank Act. She called that “unprecedented” and wrote that Kalshi is exploiting a “loophole … [that] led to an explosion of litigation in the last year.”
How to define swaps
The dictionary definition of “swaps” is a trade of one item for another. The Commodity Exchange Act (CEA) definition is far more complex. While it still involves trading, in the financial world a “swap” means a derivative agreement in which no person ever actually owns anything, but they are trading cash flows, payments, or assets predicated on a change in price or value of a commodity (or index or rate). And there are many kinds of swaps. The CEA defines 22 types of swaps, including weather, energy, and agricultural swaps. Sports-related swaps are not mentioned in the CEA.
In New Jersey’s filing, Davenport writes that the amended version of the CEA “defines ‘swaps’ to include ‘any agreement, contract, or transaction’ that, among other things, ‘provides for any purchase, sale, payment, or delivery’ that ‘is dependent on the occurrence, nonoccurrence, or the extent of the occurrence of an event or contingency associated with a potential financial, economic, or commercial consequence.'”
Congress never meant for swaps to include sports event contracts, Davenport argues, and she points to the Lincoln-Feinstein colloquy during the Dodd-Frank debate as proof. Beyond that, she writes that per the Ninth Circuit, “sports bets are not ‘swaps’ as the statutory and structure uses that term,” and that the Third Circuit took too narrow of a view of the definition and did not consider context.
“At the very least,” she wrote, “Dodd-Frank is not nearly clear enough to transfer authority over a multi-billion-dollar sports-gaming industry to a federal regulatory agency with no gambling expertise.”
In essence, Davenport is arguing that a final arbiter on the definition of a swap is needed.
Preemption debate
The United States is built on the premise that each state is unique and that sovereign states can craft their own laws for certain situations. Some simple examples are differences in sales or income tax. More emotional or complex examples are differing state laws around abortion, assisted suicide, or the death penalty. States also have varying views on the legality of gambling — 39 states allow some form of legal sports betting while 11 do not, eight allow online casinos, and 45 have state-run lotteries.
In California, a resident can legally place bets on horse races, play card games at a tribal casino or card room, and buy a lottery ticket. In Georgia, lottery tickets are the only legal form of gambling. And in Utah, there is no legal gambling.
Davenport and other attorneys general who are in court with Kalshi or the CFTC say gambling has been a states’ rights issue for more than a century. When the Supreme Court ruled in New Jersey’s favor in the 2018 PASPA case, she said, it reaffirmed that right.
In Kalshi’s Third Circuit argument, it wrote that federal law preempts state law in this case because “state laws frustrate the CFTC’s exclusive authority to regulate registered exchanges.” The Third Circuit granted a preliminary injunction based on the idea that Kalshi’s sports contracts are swaps “under the Act’s [CEA] exclusive-jurisdiction provision,” and therefore the CEA preempts state law. But Davenport, in her petition, argues that “the CFTC enjoys ‘exclusive jurisdiction’ to regulate swaps compared to other federal agencies,” which “does not displace the States’ longstanding powers to regulate gambling.”
There is express preemption, where federal law explicitly states that what state law it will override, and two types of “implied” preemption — field preemption and conflict preemption. In a federal vs. state case, field preemption is when the federal government takes over an area of law in totality, and conflict preemption is when the federal government takes over an area of law because it is considered impossible to comply with both federal and state law. Citing the Third Court’s dissenting opinion, Davenport writes that Kalshi’s arguments fail under both definitions.
Circuit courts have split
When two or more federal appeals courts hand down differing opinions, losing parties can appeal to the Supreme Court. In this case, last Friday’s Ninth Circuit opinion created a split and made it timely for New Jersey to file its petition. A circuit split, two attorneys said, can make a case compelling to the Supreme Court, though it may want to see more opinions before taking a case.
Traditionally, the Supreme Court accepts only a small percentage of the thousands of petitions filed with it annually. According to the 2025 Year End Report on the Federal Judiciary, the court received 3,856 petitions that session. Elsewhere, the number quoted is between 7,000-8,000. Per the Supreme Court FAQ section, the justices hear oral arguments in 70-80 cases per year.
In the two cases around prediction markets, four of six judges sided with states — all three judges in the Ninth Circuit and dissenting Judge Jane R. Roth in the Third Circuit. Davenport leaned into the split as a critical reason for SCOTUS to take the case.
Analyst: 90% chance SCOTUS takes case
It’s not a done deal that the Supreme Court will accept the case. On the New Normal webinar Wednesday, gambling industry analyst Steve Ruddock said he views the chances of the high court not taking the case as low — 10%.
“They might not take the New Jersey cert,” he said. “They might just want to wait for some other circuits to weigh in before they do. They might take it because it is just a clear circuit split, it’s usually the type of case they would take, and it also has economic consequence in the hundreds of billions of dollars if you look at it at scale over the course of a decade. So there is also that wonderful legal issue that they love to get on, which is federal versus states, so that kind of checks off all the boxes.”
He also pointed out that there are still many state and tribal cases against Kalshi or the CFTC that have yet to be decided.
What’s next?
When New Jersey filed its petition, a 30-day clock started for amicus briefs to be filed and for Kalshi to respond. Kalshi can request an extension — something Davenport did twice after the Third Circuit ruling. The company’s response could be that it, too, thinks the Supreme Court should hear the case, or that it does not.
In a statement, Kalshi spokesperson Dani Lever said the company “disagrees” with the New Jersey filing and that it “remains confident in the lower courts’ (Third Circuit and New Jersey District) rulings, and nothing in New Jersey’s filing today changes our view.”
The timeline is open ended. The Supreme Court begins hearing cases the first Monday of October and will hear up to two cases a day Mondays, Tuesdays, and Wednesdays through the end of April. The first “long conference” during which the justices will consider which cases to take is set for Sept. 28, a week ahead of the start of the session. From there, the justices will meet regularly to determine which cases they will accept, and they could announce they’ll accept or deny the New Jersey petition at any time.
In addition, the court could ask for the U.S. solicitor general to offer an opinion. If the court does this, there is no deadline for when Solicitor General D. John Sauer, a Trump appointee confirmed in April 2025, must respond. The court would not decide whether to take the case until the opinion is received.
On the other hand, Jarvis said, if the court deems the petition urgent, it could quickly accept the case, schedule oral arguments, and rule. He cited the Bush vs. Gore case that settled the vote count in the 2000 presidential election as a case that moved through SCOTUS in a month.
Will the Supreme Court deem the billions of dollars being wagered — both on legal sportsbooks and prediction markets — as an urgent matter? The answer is known only to the justices, though Jarvis pointed to major sporting events like the Super Bowl as potential inflection points.
Another betting go-round insulting?
Of the nine current Supreme Court justices, six were already seated when the PASPA case was heard. Since then, Brett Kavanaugh (Trump appointee, October 2018), Amy Comey Barrett (Trump appointee, October 2020), and Ketanji Jackson Brown (Biden appointee, June 2022) have joined the bench. Six of the sitting justices were appointed by Republican presidents and three by Democratic presidents.
Ruddock said the idea that the Supreme Court would have a second case involving how and by whom gambling is regulated could be construed as insulting.
“It would be very odd for … pretty much the same Supreme Court that decided PASPA to then have this case, and then go, ‘Oh, well in our decision in PASPA, we actually said Congress can regulate sports betting nationwide, but until they do it’s up to the states.’
“It would be very odd to be like, ‘Well, [former Solicitor General] Ted Olson didn’t see that, and the nine justices deciding the case didn’t see that there was already an existing law that gave the federal government complete oversight over something that is and acts like sports betting.’ It’s almost like …. by bringing this case to the Supreme Court, you would be calling the people who decided the PASPA case stupid.”
