The central legal fight over sports prediction markets is widely expected to end at the U.S. Supreme Court.
New Jersey has now made the first formal SCOTUS filing in that fight.
The dispute stems from New Jersey’s attempt to treat Kalshi’s sports event contracts as illegal sports betting. Kalshi sued the state, arguing that its sports event contracts are federally regulated derivatives under the Commodity Exchange Act and that New Jersey’s gambling laws are preempted by federal law.
The state is not yet asking the Supreme Court to decide that question. Instead, New Jersey asked for more time to file a petition challenging the Third Circuit’s ruling. That allowed Kalshi to keep offering those contracts in the state while the company’s federal preemption lawsuit continues.
New Jersey warns of federalized sports betting
The application was filed June 26 and docketed June 30 under the caption Flaherty v. KalshiEX, LLC. New Jersey asked to extend its deadline for seeking Supreme Court review from July 5 to Sept. 3, but Justice Samuel Alito granted a shorter extension, giving the state until Aug. 4 to file its petition.
New Jersey Solicitor General Jeremy Feigenbaum told the court that the preemption question is “tremendously important,” writing that the Third Circuit’s ruling would leave states unable to apply their gambling laws to sports event contracts offered on federally regulated exchanges.
“The Third Circuit majority’s conclusion — that sports bets fall under the exclusive jurisdiction of the Commodity Exchange Act and that the Act preempts state regulation of these sports bets — would federalize a multibillion-dollar-a-year sports-wagering industry at the expense of every state law in the country,” Feigenbaum wrote.
Kalshi’s New Jersey win set up SCOTUS path
The Supreme Court filing follows Kalshi’s April win at the Third Circuit, where a divided panel affirmed a preliminary injunction against New Jersey gambling regulators.
The case began after the New Jersey Division of Gaming Enforcement sent Kalshi a cease-and-desist letter over the company’s sports event contracts. New Jersey argued the contracts amounted to unlicensed sports betting. Kalshi sued, arguing that its contracts are federally regulated derivatives and that the Commodity Exchange Act preempts state gambling laws.
A federal district court sided with Kalshi at the preliminary stage, and the Third Circuit affirmed that decision in April. The ruling allowed Kalshi to keep offering sports event contracts in New Jersey while the case continues.
The Third Circuit did not issue a final ruling on whether Kalshi’s sports contracts are permanently protected from state enforcement. But the panel found Kalshi had shown a reasonable likelihood of success on its preemption argument, giving the company one of the prediction market industry’s most important legal wins to date.
Why New Jersey wants more time
The extension request may also be strategic. New Jersey is not asking the Supreme Court to decide the preemption question yet, but any petition it files would ask the justices to review the Third Circuit ruling that favored Kalshi.
New Jersey told the court that rulings in related cases could affect how it presents that petition and whether the issue creates a split among courts. “Imminent rulings in related cases could bear on the presentation of the issues and the existence of a split,” Feigenbaum wrote.
That matters because the Supreme Court is generally more likely to take a case when lower courts disagree on an important federal question.
Gaming attorney Daniel Wallach framed the timing issue more directly after the filing, writing on X that New Jersey is better positioned if it seeks Supreme Court review “with a circuit split than without one.”
An April analysis from law firm Holland & Knight made a similar point after the Third Circuit ruling. The firm wrote that the Supreme Court would “likely await a circuit split” before weighing in on the preemption issue.
Holland & Knight pointed to several appeals that remain pending in other circuits, including consolidated Ninth Circuit challenges by Kalshi, Robinhood and Crypto.com to Nevada regulators. There is also a Fourth Circuit case out of Maryland and Sixth Circuit appeals from Tennessee and Ohio.
“This multi-circuit posture strongly suggests that a circuit split is likely and Supreme Court review may be necessary,” the firm wrote.
Kalshi counsel includes Supreme Court firepower
New Jersey served the application on Milbank attorneys Neal Katyal and Gurbir Grewal. They are listed as counsel for Kalshi.
Katyal is one of the country’s best-known Supreme Court litigators. He served as acting U.S. solicitor general under President Barack Obama and has argued dozens of cases before the Supreme Court. That gives Kalshi counsel deep experience in the kind of high-court fight New Jersey is now considering.
Grewal brings a different kind of relevant experience. He previously served as New Jersey attorney general and later led the SEC’s Division of Enforcement. With that, Grewal has a background in both New Jersey enforcement and federal financial regulation.
The service filing does not necessarily mean Katyal or Grewal would handle any future Supreme Court filing or argument for Kalshi. But their inclusion shows the state’s first SCOTUS filing was sent to Kalshi lawyers with experience that maps closely onto the potential next phase of the case.
What Supreme Court review could mean
If New Jersey files a petition and the Supreme Court takes the case, the ruling could shape the legal footing for sports prediction markets nationwide. Because the Third Circuit ruling came at the preliminary injunction stage, Supreme Court review may not produce a final answer on every issue in the underlying lawsuit.
For Kalshi, a favorable ruling could strengthen the argument that sports event contracts listed on federally regulated exchanges are outside the reach of state gambling laws. That would give prediction market platforms more room to operate nationally under Commodity Futures Trading Commission oversight, even in states that view the products as illegal sports betting.
For New Jersey and other states, the opposite outcome could potentially give regulators more room to block, fine or restrict sports event contracts under gambling laws while those cases continue. That would make sports prediction markets look more like traditional sports betting, where operators must navigate state-by-state licensing and regulation.
Supreme Court review is not guaranteed
Justice Alito’s order only gave New Jersey more time to seek review. It does not mean the Supreme Court has agreed to hear the case.
New Jersey has not yet filed a petition asking the justices to review the Third Circuit ruling. Even if New Jersey files, Kalshi would have a chance to respond before the Supreme Court decides whether to grant review.
If SCOTUS declines to hear the case, the Third Circuit ruling allowing Kalshi to continue offering sports event contracts in New Jersey would remain in place while the underlying federal case continues.
New Jersey’s filing does not guarantee a Supreme Court showdown. But it moves the sports prediction market fight onto the SCOTUS docket for the first time, as states and platforms continue testing where federal commodities oversight ends and state gambling authority begins.
