New Jersey Asks Supreme Court to Referee Kalshi Sports Contracts
Jennifer Davenport filed a 332-page petition on Sept. 2 after a Third/Ninth Circuit split on CFTC preemption. A Michigan injunction still bars Kalshi sports markets.
New Jersey Attorney General Jennifer Davenport filed a 332-page petition on September 2 asking the U.S. Supreme Court to decide whether federal commodities law blocks the state from applying its gambling rules to Kalshi’s sports-event contracts.
The case is docketed as Flaherty v. KalshiEX. New Jersey wants the justices to review the Third Circuit’s April decision for Kalshi, not to retry a state gambling case on its own terms.
Kalshi is a prediction-market platform supervised by the Commodity Futures Trading Commission, the federal derivatives regulator. The filing puts that platform, the CFTC’s claim of exclusive jurisdiction, and state gambling agencies on the same map.
Event contracts pay based on whether a specified event occurs. Sports-linked versions of those contracts are what New Jersey treats as gambling and what Kalshi lists as federally regulated derivatives.
A petition for certiorari is a formal request that the Supreme Court take the case. The Court may decline review, and no timeline has been set for a decision.
Two circuits, opposite answers
The Third Circuit ruled 2-1 on April 6 that the CFTC has exclusive jurisdiction over the Kalshi contracts at issue. It held that New Jersey’s sports-gambling laws were preempted as applied to those contracts — federal commodities law, in that court’s view, blocked the state’s rules.
The Supreme Court granted New Jersey an extension on July 24, moving the filing deadline to September 3. The petition arrived one day before that deadline.
Four days before New Jersey filed, the Ninth Circuit reached the contrary conclusion in a Nevada dispute. Its August 28 ruling found that Kalshi’s sports contracts are wagers, not federally protected swaps, and that Nevada gambling regulators may enforce state law.
The Ninth Circuit said that holding created a conflict with the Third Circuit. The question now teed up is whether sports-event contracts offered through a CFTC-regulated platform fall only under federal commodities oversight, or can also be treated as gambling under state law.
Michigan’s injunction still stands
A Michigan court has ordered Kalshi to keep blocking sports prediction markets in that state. The injunction — a court order requiring or forbidding specified conduct — converts a temporary restraining order issued in June.
Violations would result in a fine of $500,000 per day. That order remains in force.
State enforcement has not waited on the Supreme Court. Customers in Michigan remain under a live court bar on those sports contracts, whatever the Third Circuit said about New Jersey.
What exclusivity would change
The dispute is definitional. If event contracts on a CFTC-registered platform are federal derivatives, states cannot layer sports-betting licenses or bans onto the same product.
If they are wagers, each state’s gambling regime can attach. That choice decides who writes the rulebook: the CFTC, or state gambling authorities.
It also decides whether a customer in New Jersey, Nevada, or Michigan can use a federally listed sports contract at all. Congress has not enacted a statute that settles this product class. The petition asks the Court to settle it through preemption.
The same federal line, other products
Firms are pressing the same boundary outside sports contracts. The proposed CLARITY Act would give the CFTC exclusive jurisdiction over cash or spot transactions in digital commodities conducted through entities required to register as digital commodity exchanges, brokers, or dealers.
The Securities and Exchange Commission would keep authority over securities and specified anti-fraud powers. Dual registrants would need conflict-of-interest policies, and the two agencies would be directed to share information. The bill would not draw a clean one-agency map, and it is not law.
Ondo Finance, in an August 24 comment letter to the SEC and CFTC, argued that new rules are not required to allow perpetual contracts based on U.S. stocks. It said the existing security-futures framework already accommodates that product.
Those submissions do not decide Flaherty v. KalshiEX. They show that exclusivity — which federal agency occupies the field, and what that leaves for the states — is the live question across event contracts, digital commodities, and stock-linked derivatives.
What remains unknown
The Supreme Court has not agreed to hear the case. It may deny the petition and leave the Third and Ninth Circuit conflict in place.
No timeline has been announced for a grant, a denial, or a ruling on the merits. The Michigan injunction remains in force.
How other states will proceed while the petition is pending is not answered by the filing. Both the Third Circuit’s New Jersey ruling and the Ninth Circuit’s Nevada ruling stand until a higher court or further proceedings displace them.