New Jersey and its Division of Gaming Enforcement filed a long-anticipated petition on September 2, 2026, asking the Supreme Court to review and reverse a Third Circuit ruling protecting prediction market operators.
The petition targets the Third Circuit’s decision in KalshiEX, LLC v. Flaherty, which upheld an injunction barring New Jersey from enforcing its gambling laws against KalshiEx LLC and other prediction market operators.
The filing arrives just days after the Ninth Circuit’s decision in Kalshi v. Assad, which directly and repeatedly disagreed with the “conclusion, interpretation, and methodology” of the Third Circuit’s Flaherty ruling.
New Jersey’s petition frames a single, focused question: whether the 2010 Dodd-Frank Act preempted states from regulating sports bets offered on markets registered with the Commodity Futures Trading Commission.
At its core, the dispute asks whether Congress silently federalised the multi-billion-dollar sports betting industry through a single word, “swap,” in legislation designed to regulate financial derivatives after the 2008 financial crisis.
New Jersey argues that Kalshi seeks to “upend decades of careful regulation of gambling based on broad definitions of the words used in a Wall Street Reform Bill,” presuming Congress “hid an elephant in a mousehole” inside Dodd-Frank.
The petition contends that sporting event outcomes, such as whether the Dodgers win the World Series or how many touchdowns a player throws, are not “events” associated with financial consequences as Dodd-Frank uses that phrase.
New Jersey further argues that since sports betting played no role in the 2008 financial crisis, it is “unlikely that these financial reforms had anything to do with sports gambling” when Dodd-Frank was enacted.
The petition also highlights a significant practical consequence: if the CFTC’s reading of Dodd-Frank is correct, state-licensed sportsbooks have been violating federal law since the Supreme Court’s 2018 Murphy v. NCAA ruling freed states to legalise sports betting.
New Jersey cited a growing body of case law, pointing to at least 20 decisions across federal district courts and state courts, with the vast majority rejecting the Third Circuit’s approach and siding with the states and the Ninth Circuit.
The petition quotes Murphy directly, noting that “Americans have never been of one mind about gambling,” and that the federalist system allows states to make different choices, with forty-four states and hundreds of Indian tribes opposing the Kalshi and CFTC position.
With similar cases pending in the Second, Fourth, and Sixth Circuits, further rulings on one side or the other of this deepening legal conflict are expected to arrive in the coming months.
One additional argument not raised in the petition may yet emerge through amicus briefs: the Flaherty majority effectively handed the CFTC, rather than Congress, the authority to decide whether state gambling laws should be preempted.
If that approach survives Supreme Court scrutiny, whether sports event contracts are prohibited as contrary to the public interest could depend on the administrative and possibly political preferences of whichever leadership runs the CFTC at any given time.
Legal observers across gaming, financial regulation, and federalism will be watching closely as this case shapes the ever-evolving balance of power between states, the federal government, and its regulatory agencies.