Prediction Markets at the US Supreme Court 'What If:' What Happens If the Supreme Court Passes on Reviews?

The "multiverse" is an easy, quick "fix" that media companies have long used to get people to consume new media in popular fiction franchises without having to stick to the established "rules" of the franchise.

The goal is to milk a franchise cow until it resembles a hollow husk of its former glory, so pesky concerns like congruity and character arcs are acceptable casualties.

This article series takes that concept into an antecedent and non-fiction framework. This first iteration considers what might happen if the U.S. Supreme Court opts not to weigh in on the legal questions in Kalshi v. Assad, Kalshi v. Flaherty, and other cases.

This piece is purely speculative and not intended to be a comprehensive look at all the possible ramifications of that action.

Instead, it offers an overview of the most pertinent business and legal consequences. The discussion starts with establishing the premise, or why the Supreme Court might give Assad and Flaherty a miss.

Why the Supreme Court might not review decisions in Assad and Flaherty

If an exchange were offering contracts on the Supreme Court granting cert on at least one of the current petitions in Assad or Flaherty, the "yes" side of that market should probably be trading between $0.65 and $0.70 right now.

There are several factors pointing toward certification:

• The clean split between the US Third Circuit Court of Appeals and the Sixth/Ninth circuits on whether sports event contracts are gambling and whether the Commodity Exchange Act preempts state gambling laws.

• Similar appeals are ongoing before the Second, Fourth, Seventh, and 10th circuits.

• The involvement of the US Department of Justice (DOJ) and the Commodity Futures Trading Commission (CFTC)

• Both sides are asking for review.

However, the "no" side of that fictional market also merits consideration.

Linda Goldstein, partner at CM Law, explains why: "The one thing that could stand in the way of cert is more procedural than substantive. All of the current rulings are preliminary-injunction rulings, not final merits judgments, and the CFTC has a pending rulemaking that could reshape the question.

"The Justices sometimes prefer to wait for a final judgment or for the agency to finish acting. So if I had to predict, I would say it is likely the Supreme Court will grant cert, but I wouldn’t be shocked if the Court holds off for a term," Goldstein added.

Assuming that the Supreme Court (SCOTUS) takes that path, many entities will have decisions to make. Among those is how prediction market operators will navigate a national landscape in which they must deal with differing legal precedents.

The "patchwork" boogeyman for prediction market exchange operators

Part of the argument that the CFTC/DOJ and exchange operators have made in court to date regarding the Commodity Exchange Act's (CEA) and the Dodd-Frank Act's potential preemption of state gambling laws is that Congress intended in those statutes to provide a uniform standard for financial markets throughout the country.

Some district courts have rightfully treated these "won't someone think of the children" pleas like a pampered pet cat crying about having to wait 10 seconds for its meals to be hand-delivered.

Somehow, gambling companies like DraftKings, Fanatics, and FanDuel barely eke out an existence with tens of billions of dollars in quarterly revenue while navigating jurisdictional disparities. Even people who bake brownies on the side manage varying regulations not just from state to state but within different parts of individual states without those disparities swallowing their enterprises whole.

Goldstein also argues that a "patchwork" framework wouldn't be the specter from "The Ring" crawling out of the television for prediction market exchange operators.

"The patchwork would be about how far state gambling law reaches, not about who regulates the exchanges themselves," Goldstein said. "The CFTC would still have exclusive jurisdiction over designated contract markets and trading on them. To be fair to the states, they would argue there is no patchwork of commodities law here because these contracts aren't swaps.

"They're sports bets, and gambling has always been regulated state by state," she continued. "That's really the core disagreement. The Third Circuit says they are swaps and the Ninth and Sixth Circuits say they are gambling. Even on the swap question, the Sixth Circuit made a pointed textual argument stating that because the CEA refers to event contracts that are 'unlawful under any Federal or State law,' the statute 'necessarily implies that certain event contracts may be listed in some states but not in others.' On that reading, arguably some state-by-state variation isn’t something Congress tried to stamp out. It’s something the statute expects. So while a denial would create a patchwork, there would still be disagreement on whether that is inconsistent with Congress’ intent."

Another consideration is how the CFTC might proceed without SCOTUS guidance on these issues.

How the CFTC might move forward in the short-term

Silence from SCOTUS on Assad and Kalshi would be tantamount to consent to the Third and Ninth Circuit rulings in those cases, even if only temporarily. The result would be a new status quo for the CFTC Chair Michael Selig regardless.

In the short term, Selig would have two considerations for how he moves forward. Those are what to do in other outstanding lawsuits and how to proceed in rulemaking.

On litigation, Goldstein does not expect Selig to pull up stakes.

"Under Chairman Selig, the agency has been very clear that it sees itself as the sole regulator here," Goldstein said. "What I’d expect is a more selective approach. Where a circuit hasn’t yet issued binding adverse precedent, like the Second or Fourth, the CFTC would likely keep pressing, since a favorable ruling there deepens the split and keeps the issue alive. In circuits where it has already lost, it might voluntarily dismiss or seek stays rather than produce more bad law."

Goldstein also believes that Selig might shift more of his attention and time to regulatory powers.

"After Loper Bright, courts no longer defer to an agency’s reading of the statute, but a carefully reasoned notice-and-comment rule can still be persuasive, and it builds a better record," Goldstein added. "[Those actions could include] finalizing the Rule 40.11 amendments and Appendix F. The proposal defines 'gaming' fairly narrowly as activities for recreation or entertainment, governed by rules, where outcomes turn on luck, skill, or athletic ability during the activity. It also takes the preliminary view that the agency won’t make categorical public-interest determinations, and it gives exchanges procedural rights. Second, further rules defining event contracts as swaps, which goes right to the issue that split the circuits. Third, a formal interpretive statement laying out the agency’s preemption view, even though courts won’t defer to it."

"The agency may also try to take some of the steam out of state objections by tightening core-principle requirements for exchanges on market integrity, geofencing, and age verification," Goldstein continued. "Those are the consumer-protection concerns states keep raising. Memoranda of understanding with willing states and staff advisories are other possibilities."

From a longer-term perspective, more unknown quantities enter the chat.

Questions arise for CFTC with long-term prognostications

The future of prediction market regulation becomes murkier in terms of the CFTC's role and how it might shape the activity long term without guidance from SCOTUS. That's partly because the agency's future depends on political fortunes.

"Whether the CFTC stays involved all depends on who is running the agency," Goldstein said. "The CFTC's current position is itself the product of a change in leadership. The CFTC has done a complete 180 under the Trump Administration. Before the election, it was fighting Kalshi in court and proposing to treat these contracts as against the public interest. After the election, it reversed course and started suing the states instead."

Even if the political winds don't shift in the executive branch, the CFTC still faces long-term obstacles.

"There are real limits," Goldstein continued. "An agency can’t create preemption on its own if Congress didn’t provide for it, and after Loper Bright, courts give the CFTC no deference on what the CEA means. Rules can also be reversed by a future administration. A final rule could actually make Supreme Court review more likely, because states would almost certainly challenge it. So the CFTC has options, but none of them is a substitute for an answer from Congress or the Court."

Exchange operators may shift to other tactics to secure that answer.

Shifting of resources from litigation to lobbying

In the event that SCOTUS declines its chances to take part in these disputes, the most legitimate source of a uniform favorable national framework for either side of the "are sports event contracts gambling" debate and other disputes becomes Congress. Some of the mountain of billable hours for legal counsel could shift to rising peaks of billable hours for lobbyists.

"I think the shift would be substantial," Goldstein said. "If the courts won’t give the industry a single national answer, Congress is the only body that can. The cleanest fix would be an express preemption clause in the CEA covering event contracts on registered exchanges, or language in broader market structure legislation that settles the swap-versus-gambling question. Given that the industry did around $51 billion in volume in 2025, and that sports have made up roughly 80 percent of Kalshi’s volume since mid-2024, the incentive to invest in Washington is obvious."

"But it wouldn’t be a clear path," Goldstein added. "The opposition is broad and well organized: state attorneys general, tribes protecting gaming compacts, commercial casinos, and some sports leagues. There’s already a bill on the other side, the Curtis-Schiff Prediction Markets Are Gambling Act introduced in March, which would treat sports and casino-style event contracts as gambling outside the CFTC’s jurisdiction. 44 state attorneys general also told the CFTC this summer that its proposed rule goes too far. So you’d have dueling lobbying campaigns, and gridlock is a realistic outcome."

To some degree, though, this is a walk-and-chew-gum consideration for exchange operators.

"I also wouldn’t expect litigation to stop," Goldstein continued. "The companies would keep litigating in parallel, partly to protect their position in favorable circuits and partly because a pending legislative fight is a good reason to keep cases alive."

The future holds more unknowns without SCOTUS

The path forward for prediction market trading in the US, without SCOTUS entering the conversation, is one the industry, regulators, and state governments can navigate. It may be less preferential in many ways for those parties, though.

Congressional intervention could fill in the gaps, but political headwinds would play a large role in that possibility. Factoring in the impact of future elections further diversifies the multiverse of possibilities still viable as of this writing.