Over the past decade, sports betting has taken the nation by storm. According to a survey conducted by the Siena Research Institute and St. Bonaventure University’s Jandoli School of Communication, 27% of Americans and 52% of men ages 18-49 have an active betting account through platforms such as DraftKings and FanDuel.[1] While 33 states and Washington, D.C., have legalized sports betting in some form, 18 other states, including California and Texas, have yet to follow suit.[2] This polarization among the states is especially striking, considering that a Washington Post analysis found that sports betting references air on television every 4 minutes during pro and college sports broadcasts.[3]
One betting platform has found a legal workaround that lets users bet from all 50 states: Kalshi. Priding itself as “the first CFTC regulated exchange dedicate[ed] to trading on the outcome of future events,”[4] Kalshi operates as a “prediction platform.” Prediction platforms are federally regulated by the Commodity Futures Trading Commission (CFTC) and are not subject to state betting laws, unlike DraftKings, which is considered a state-regulated sportsbook.[5] [6] This loophole has caused a circuit split, prompting New Jersey to ask the Supreme Court to intervene.
A Circuit Split and a Call to the High Court
In March of 2025, Nevada’s Gaming Control Board sent Kalshi a cease-and-desist for its failure to register its sports contracts as wagers with the state. Kalshi argued to the Ninth Circuit Court of Appeals that its “sport event contracts” are merely “swaps,” which fall outside state control. A swap is a financial instrument whose payout depends on the occurrence, nonoccurrence, or extent of specific events and are solely regulated by the CFTC. Kalshi urged the three-judge panel to define “swap” broadly enough to cover bets regarding game outcomes, whereas a narrower definition would limit users to bet on whether the game occurs at all. In August, the court ruled against Kalshi, reasoning that although Kalshi purports its wagers as swaps, the platform advertised itself as sports gambling, which is regulated by the state.[7]
However, this past April, the Third Circuit Court of Appeals concluded differently. In a 2-1 decision, the court held that Kalshi’s sport contracts are indeed swaps that fall within the CFTC’s jurisdiction. While New Jersey argued that Kalshi’s swaps are not covered by the Commodity Exchange Act (CEA) because a sporting event’s outcome is not connected to a measurable financial metric, the court instead reasoned the CEA provides the outcome need only be associated with a potential financial, economic, or commercial consequence. Further, the court held the CEA preempts state gambling laws that directly interfere with swaps traded on designated markets.[8]
On September 2, New Jersey regulators and New Jersey Attorney General Jennifer Davenport petitioned the Supreme Court to address the discrepancies in prediction market regulation. While disputes between state regulators and prediction market platforms, such as Kalshi and Crypto.com, continue to be litigated in district courts, New Jersey’s petition is the first to bring this issue directly to the Supreme Court. Specifically, the petition calls for an interpretation of the meaning of “swap.” Swaps can only occur in CFTC-registered markets, and if sports betting is found to be a swap, casinos and sportsbooks would no longer have the ability to offer sports bets, allowing the CFTC to become the sole regulator of sports betting across the country.[9]
A Bill in Congress and a Push for New Rules
State actors are not the only ones demanding pervasive industry-wide regulation. In 2025, Senator Richard Blumenthal (D-CT) and Congressman Paul Tonko (D-NY) co-sponsored the Supporting Affordability and Fairness with Every Bet Act (SAFE). This legislation is an effort to federally regulate online sports betting by banning gambling advertisements during live sporting events, barring select enticing promotions, and require a study on the public health impact of online sports betting. From 2018 to 2024, legal sports bet totals grew exponentially from $5 billion to $150 billion, as well as a 33% spike in gambling addiction. Although the bill is currently stalled in the U.S. House of Representatives, this legislation could bring the reform that both states and consumers are looking for.[10] [11]
[1] More Than a Quarter of Americans, 27% Have An Active Online Sports Betting Account; A Third Have Opened an Account At Least Once https://sri.siena.edu/2026/04/13/more-than-a-quarter-of-americans-27-have-an-active-online-sports-betting-account-a-third-have-opened-an-account-at-least-once/
[2] U.S. sports betting: Where all 50 states stand on online sports betting sites https://www.cbssports.com/betting/news/u-s-sports-betting-where-all-50-states-stand-on-legalizing-online-sports-betting-sites-proposed-legislation/
[3] Washington Post analysis shows how prevalent betting ads are during live sports https://www.sportsbusinessjournal.com/Articles/2026/05/19/washington-post-analysis-shows-how-prevalent-betting-ads-are-during-live-sports/
[4] About Kalshi https://kalshi.com/about
[5] Young adults under 21 traded $5 billion on Kalshi this year, amid prediction market frenzy https://www.cnn.com/2026/08/28/business/young-adults-trading-kalshi
[6] Kalshi vs. DraftKings: Which Is Better for Sports Traders? https://www.si.com/prediction-markets/reviews/kalshi-vs-draftkings
[7] 9th Circ. Rules Against Kalshi In Sports Wager Circuit Split https://www.law360.com/articles/2519246/9th-circ-rules-against-kalshi-in-sports-wager-circuit-split
[8] 3rd Circ. Backs Kalshi In Prediction Markets Battle With NJ https://www.law360.com/articles/2461962
[9] NJ Urges Justices To Resolve Kalshi Sports Betting Split https://www.law360.com/articles/2520762/nj-urges-justices-to-resolve-kalshi-sports-betting-split
[10] Gambling addiction is soaring: The SAFE Bet Act can stop it getting worse https://thehill.com/opinion/healthcare/5825892-sports-betting-public-health-threat/
[11] U.S. SENATOR BLUMENTHAL AND CONGRESSMAN TONKO VOW TO ADVANCE SAFE BET ACT TO PROTECT CONSUMERS FROM PREDATORY SPORTS GAMBLING PRACTICES https://www.prnewswire.com/news-releases/us-senator-blumenthal-and-congressman-tonko-vow-to-advance-safe-bet-act-to-protect-consumers-from-predatory-sports-gambling-practices-302756101.html