New Jersey has officially petitioned the Supreme Court to rule on whether sports prediction markets are exempt from state gambling laws.
The state is appealing against the Third Circuit, which ruled in favor of Kalshi in May. At the time, New Jersey indicated that it would appeal to the Supreme Court. The Ninth Circuit‘s ruling last week, which went against Kalshi, created a Circuit split.
In its petition, New Jersey said this split means a Supreme Court judgment is “needed to provide lower courts, States, prediction markets, the CFTC, Tribes, and casinos with a definitive answer.”
Around 50% Chance SCOTUS Accepts Case This Year
At least 4 of the 9 justices on the Supreme Court must vote to grant certiorari for the Court to take the case. Polymarket offers a market on when SCOTUS will accept a sports event contracts case. The chances spiked to 52% after the Ninth Circuit ruling, but have since fallen to 46%.
The Supreme Court only accepts around 100 cases per year, less than 5% of all petitions. The Third and Ninth Circuit rulings have not been final judgments, and the Court may therefore “wait for a more procedurally developed case,” said former CFTC regulator Carl Kennedy.
Kalshi Says Rules Revision Coming
In response to New Jersey’s petition, Kalshi spokesperson Dani Lever stated, “We disagree with New Jersey’s filing. Kalshi is an open, nationwide financial exchange. It cannot be regulated by 50 different regulators. Both the Third Circuit and the District of New Jersey sided with Kalshi because the CFTC’s exclusive jurisdiction preempts state law.”
The Third Circuit ruled 2-1 in favor of Kalshi, with the one dissenting judge commenting that the platform is facilitating gambling and should be subject to state gambling laws.
The Ninth Circuit ruled unanimously against Kalshi, with all three judges ruling that its sports contracts are sports betting. The ruling cited the CFTC’s rules, which state that the agency may prohibit contracts related to gaming if it deems them against the public interest.
The rule’s vague wording has been the focus of countless lawsuits, with Kalshi and the CFTC arguing that it grants the CFTC authority to regulate sports and other markets. States claim the rule is proof that Congress did not intend to allow federal regulation of sports markets.
“Nothing in the Act gives the CFTC unprecedented authority to become the sole regulator of sports gambling in this country, much less gives companies a get-out-of-50-state-laws-free pass by self-certifying their bets on a CFTC-registered market,” New Jersey’s petition wrote.
Lever said the Ninth Circuit’s different interpretation is “based on a regulation that’s in the process of being rewritten.”
Kalshi CEO Tarek Mansour also said that a change to CFTC rules could come in the near future, clarifying that sports contracts are permitted. There remains debate over whether the CFTC has enough authority to rewrite its rules without the explicit backing of Congress.
No Consensus on Supreme Court Verdict
How the Supreme Court rules could have huge implications for the future of sports betting in the US. There is no clear consensus on the verdict the Court will reach.
Circa Sports CEO Derek Stevens told CasinoBeats last week that he believes there is too much opposition among states for the Court to rule in favor of Kalshi.
“I’m of the position that there’s 44 of the 50 states’ Attorneys General in lawsuits with the prediction markets. I think there’s too much money that would be lost. I still believe that a more reasonable outcome will be developed,” said Stevens.
He pointed to the tax revenue states currently collect from sports betting that could potentially be lost.
“The state of New York will lose over $1.5 billion in tax revenue. The state of Illinois will lose a tremendous amount of tax revenue,” he said. If the Supreme Court rules in favor of prediction markets, “you’re going to have a lot of states that are going to have massive holes in their budget.”
Lawyers also have different opinions on how influential the Ninth Circuit ruling will be. Law professor Melinda Roth laid out examples of arguments that Kalshi may draw from the ruling to support its case. Stephen Piepgrass of legal firm Troutman Pepper Locke told CasinoBeats that the Supreme Court has frequently gone against the Ninth Circuit in recent times.
Gaming lawyer Daniel Wallach, however, said that many of the arguments in the Ninth Circuit ruling make the case difficult for Kalshi. The judges all said that Kalshi’s sports markets do not meet the criteria for swaps under the Commodity Exchange Act (CEA).
Additionally, Wallach said the major questions doctrine dictates that federal agencies must have clear and explicit authorization from Congress to alter rules with vast “economic and political significance.” With Kalshi valued at around $40 billion and the revenue states collect from sports betting, there is no doubt that this issue has huge economic consequences.
“The issue is one of tremendous practical and legal consequence: Kalshi seeks to federalize the multi-billion-dollar sports betting industry at the expense of every state sports gaming law,” said New Jersey’s petition.
It makes it perhaps the perfect scenario that Kalshi argues prediction markets allow for companies facing a potentially huge economic impact to hedge their bets. As yet, the platform has not joined Polymarket in creating any markets on the topic.
The post New Jersey Petitions Supreme Court to Hear Sports Prediction Market Case Following Circuit Split appeared first on CasinoBeats.
New Jersey has officially petitioned the Supreme Court to rule on whether sports prediction markets are exempt from state gambling laws. The state is appealing against the Third Circuit, which ruled in favor of Kalshi in May. At the time, New Jersey indicated that it would appeal to the Supreme Court. The Ninth Circuit‘s ruling
The post New Jersey Petitions Supreme Court to Hear Sports Prediction Market Case Following Circuit Split appeared first on CasinoBeats.