Supreme Court Poised to Decide Fate of Prediction Markets

A major regulatory battle is brewing in the US over the jurisdiction of prediction markets. On September 2, New Jersey filed a petition with the Supreme Court to resolve a growing circuit split over whether Commodity Futures Trading Commission (CFTC)-registered prediction markets can offer sports-related event contracts without complying with state gambling laws.

The case stems from a 2018 decision that allowed states to regulate sports betting within their jurisdictions. However, the CFTC maintains exclusive jurisdiction over 'swaps' traded on designated contract markets, including prediction markets like KalshiEX LLC (Kalshi). The Ninth Circuit reached an opposite conclusion in Kalshi v. Assad, holding that sports-based event contracts are not 'swaps' under Dodd-Frank.

The petition frames the stakes as existential for both the prediction market industry and state gaming regulators. If Kalshi's interpretation prevails, any company could bypass all 50 states' sports gambling frameworks simply by self-certifying contracts on a CFTC-registered exchange.