40 States Urge Supreme Court to Rule on Prediction Markets

The bipartisan coalition submitted an amicus brief on Wednesday, October 7, arguing that the conflict between state gambling authorities and federally regulated financial markets requires a definitive ruling from the nation's highest court. The dispute comes as prediction markets expand their presence in the United States, offering contracts linked to sports, politics and cultural events.

States Challenge Federal Oversight of Prediction Markets

The brief supports New Jersey's petition asking the Supreme Court to review an appellate court decision issued earlier this year. That ruling found that federal legislation governing commodity trading preempted the state's gambling laws in the dispute involving prediction markets.

The states argue that the case raises fundamental questions about their authority to regulate gambling activities within their jurisdictions. They maintain that platforms offering event-based contracts should not be exempt from state gambling regulations simply because their products are structured as financial instruments.

The attorneys general described the legal situation as increasingly fragmented, stating in the brief that the dispute “has splintered the circuits and lower courts with no resolution on the horizon. Only this Court can provide the much needed answer. It should do so.”

Kalshi and Polymarket at the Center of the Dispute

Prediction markets allow users to trade contracts whose value depends on the outcome of future events. Platforms such as Kalshi and Polymarket have attracted growing interest by offering markets related to sporting competitions, elections, public affairs and entertainment.

The regulatory classification of these products is central to the legal battle. State authorities argue that certain event contracts function similarly to bets and should therefore fall under the same rules governing sports wagering and other gambling activities.

The platforms, by contrast, maintain that they operate as federally regulated exchanges and should be subject to federal requirements rather than separate gambling regulations imposed by individual states.

In their filing, the attorneys general rejected the industry's interpretation of federal law, arguing that prediction markets cannot avoid state oversight by presenting their products as financial contracts.

“The prediction markets are wrong. They cannot strip the States of their core sovereign power through relabeling and window-dressing,” the brief states.

Bipartisan Coalition Seeks to Preserve State Gambling Authority

The intervention brings together states governed by both Republicans and Democrats in opposition to an expanding industry supported by Silicon Valley investors and President Donald Trump.

The coalition's position centers on the principle that states retain the authority to determine how gambling is regulated within their borders. Officials contend that allowing prediction markets to operate outside state gambling frameworks could undermine existing licensing systems and the regulatory requirements applied to sports betting operators.

The dispute also highlights the growing tension between state-level gambling regulation and federal oversight of financial markets. While states generally regulate gambling within their jurisdictions, prediction market operators argue that their products fall under the federal framework for derivatives and commodity trading.

CFTC Defends Federal Regulatory Role

The Trump administration has broadly supported the expansion of prediction markets. The Commodity Futures Trading Commission (CFTC), led by Trump appointee Michael Selig, has argued that it should serve as the industry's sole regulator.

That position conflicts with the states' argument that federal oversight should not prevent them from enforcing gambling laws when event contracts resemble sports bets or other wagering products.

The Supreme Court's potential intervention could clarify the boundaries between the two regulatory systems and influence how prediction markets operate across the country.

Supreme Court Decision Could Shape the Industry's Future

It remains uncertain whether the Supreme Court will agree to hear New Jersey's case. However, the petition arrives amid a series of legal challenges to prediction market operators in different jurisdictions.

Judges in states including Nevada and Washington have ruled against Kalshi in separate proceedings, while other disputes remain pending before the courts.

The outcomes could have significant implications for the industry's expansion, particularly if operators are required to obtain state gambling licenses or comply with restrictions that vary across jurisdictions.

For the U.S. gaming industry, the case represents a key test of whether prediction markets will be treated primarily as federally regulated financial exchanges or as businesses subject to state gambling laws. A Supreme Court ruling could establish a clearer framework for operators, regulators and licensed sports betting companies competing in an increasingly complex market.