Full Breakdown
Supreme Court Weighs State Authority Over Prediction Markets
By Drooid · · How we work
Core Petition and Legal Stakes
New Jersey has asked the United States Supreme Court to decide whether states may regulate prediction-market platforms. A bipartisan coalition of 40 states—including the District of Columbia and led by Ohio Attorney General Andy Wilson—has filed an amicus brief supporting the petition. The brief argues that treating prediction contracts as “swaps” would strip states of their power to protect citizens through gambling regulations. The Court will consider the petition in a closed-door session later this term.
Background and Context
Prediction markets let users wager on future events, from sports results to political elections. Operators such as Kalshi and Polymarket say their products are financial swaps subject to CFTC oversight, while states contend the contracts are gambling under state law. Lower-court rulings are split: the Third Circuit upheld New Jersey’s actions against Kalshi, whereas the Sixth and Ninth Circuits found no federal preemption. The dispute hinges on whether the Commodity Exchange Act preempts state gambling statutes.
Data and Market Scale
- The NFL reports that prediction-market trading tied to football generated $1.8 billion on the first Sunday of the season, more than half of total market volume.
- Analysts estimate total prediction-market turnover at $51 billion in 2025, with sports contracts accounting for roughly 80 percent of Kalshi’s volume since mid-2024.
- Kalshi permits participants as young as 18, while most states require a minimum betting age of 21.
Official Statements & Responses
The NFL’s amicus brief echoes the states’ position, calling prediction contracts “effectively gambling” and questioning the CFTC’s capacity to safeguard game integrity. The league also calls for a uniform 21-year age limit. Kalshi and Polymarket argue that federal regulation would provide a consistent national framework, emphasizing that their products function as swaps under commodity law.
Verbatim Quotes (Expert Commentary)
- “Under Chairman Selig, the agency has been very clear that it sees itself as the sole regulator here,” — Linda Goldstein
- “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,” — Linda Goldstein
- “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,” — Linda Goldstein
These remarks from Linda Goldstein, a partner at CM Law, outline the CFTC’s exclusive regulatory view and the impact of the *Loper Bright* decision.
Conflicting Reports & Gaps
The appellate split creates uncertainty about the legal classification of prediction contracts. The Third Circuit favors state authority; the Sixth and Ninth Circuits find federal preemption. All decisions are preliminary injunctions, leaving open the possibility that pending CFTC rulemaking could reshape the issue before the Supreme Court acts.
Why It Matters
A ruling affirming state power would preserve the patchwork of gambling regulations, allowing states to impose safeguards such as age limits and market-integrity requirements. A decision favoring federal preemption could centralize oversight under the CFTC, streamlining compliance for national platforms but limiting state-level consumer protections. Legislative proposals, including the Curtis-Schiff Prediction Markets Are Gambling Act, seek to codify a gambling-focused framework.
What’s Next
The Court’s closed-door session later this term will determine whether it grants certiorari. In parallel, the CFTC is expected to continue its rulemaking, with Chair Michael Selig likely weighing selective litigation strategies and potential amendments to define “gaming” more narrowly. Congressional action remains a possible avenue for a uniform national solution, though political dynamics suggest a protracted path forward.