New Jersey has asked the US Supreme Court to decide whether states can treat prediction markets such as Kalshi and Polymarket as gambling products subject to local law. The petition, filed Wednesday, pushes a two-year dispute over the fast-growing sector to the country’s highest court for the first time.

The case could determine whether prediction markets are overseen primarily by state gaming regulators or by the Commodity Futures Trading Commission alone. That question has become more urgent after federal appeals courts reached conflicting conclusions on the issue.

Challenge to the Third Circuit ruling

New Jersey is asking the justices to overturn a ruling from the Third Circuit in Philadelphia, which said the CFTC has exclusive authority to regulate platforms including Kalshi and Polymarket. Under that view, federal oversight would preempt New Jersey’s gambling laws.

State Attorney General Jennifer Davenport said the dispute is about the limits of federal power. In a statement, she said Congress did not quietly shield the sports-betting industry from state law. Her office argues in the filing that the Commodity Exchange Act did not make the CFTC the sole regulator of sports gambling in the United States and that states have traditionally controlled matters tied to health and safety.

A split between federal appeals courts

The timing of New Jersey’s petition is notable because it arrived about a week after a unanimous Ninth Circuit ruling that backed Nevada’s authority to regulate prediction markets as sports betting. That decision conflicts with the Third Circuit’s view that Kalshi’s event contracts are legally distinct from sportsbooks and fall under federal supervision.

With two appeals courts now pointing in different directions, the chances of Supreme Court review may have increased. According to the report, the justices are expected to decide this fall whether to hear the case, and if they do, a ruling could come next summer.

Industry and state opposition widens

Kalshi, described in the report as the most popular prediction site in the country, is named in New Jersey’s petition and has said it expects to prevail. Spokeswoman Dani Lever said the company operates as an open, nationwide financial exchange and cannot be regulated by 50 different authorities.

Resistance to the platforms extends well beyond one state. A coalition of 44 states has described prediction sites as unlicensed sportsbooks that avoid the consumer-protection rules and tax burdens faced by traditional betting operators. Native American tribes and major gaming companies, including FanDuel and DraftKings, also view the platforms as competitors operating outside the usual framework.

What is at stake for the market

The regulatory fight matters in part because sports-related contracts represent the core of the business. The report says more than 80% of weekly volume comes from sports wagers, and that Nevada, Michigan, and Washington have already obtained court orders pausing Kalshi’s sports contracts.

The broader market has also expanded rapidly. Cryptopolitan reported total prediction-market volume rising to $38.5 billion from $2 billion in August 2025, a 1,900% increase. Because Kalshi supports crypto deposits and withdrawals and Polymarket uses on-chain stablecoin guarantees, a state-by-state crackdown could spill into parts of the crypto market as well.

Next step: whether the Supreme Court takes the case

The dispute now presents a direct clash between state regulators and the federal government. CFTC Chairman Mike Selig, identified in the report as a Trump appointee, has said the agency has exclusive jurisdiction over prediction markets and has encouraged their growth.

The immediate question is not the final merits but whether the Supreme Court agrees to hear the appeal. If the justices decline, the split between the Third and Ninth Circuits would remain in place, leaving the legal treatment of prediction markets unsettled across the country.

Source: Cryptopolitan