The U.S. Supreme Court may take up a dispute over whether sports-related prediction-market contracts are federally regulated derivatives or gambling products subject to state law. The justices are considering appeals involving Kalshi, Crypto.com and Robinhood as lower courts have reached conflicting conclusions on the limits of federal commodities regulation.
The court has not yet agreed to hear the cases. Reuters reported that prediction-market operators describe their event contracts as financial derivatives under the Commodity Futures Trading Commission’s exclusive authority, while a bipartisan coalition of states argues the sports offerings are gambling that must comply with state betting laws.
New Jersey has asked the Supreme Court to resolve the question after the Third Circuit, by a 2-1 vote, barred the state from enforcing its sports-gambling laws against Kalshi at the preliminary-injunction stage. The appeals court held that Kalshi had shown a reasonable likelihood that the Commodity Exchange Act pre-empted New Jersey law for its sports-related contracts.
The Third Circuit described Kalshi as a CFTC-licensed designated contract market and found its sports contracts to be swaps within the agency’s exclusive jurisdiction. Kalshi’s contracts identify an event, offer specified outcomes and payouts, expire at a set time, and fluctuate in price with market views of the event’s likelihood.
As we reported in August, the Ninth Circuit held that Nevada could regulate sports contracts offered by Kalshi, Crypto.com and Robinhood. In Kalshi’s case, the Ninth Circuit concluded that the sports contracts were sports bets rather than swaps, meaning the Commodity Exchange Act was unlikely to pre-empt Nevada’s gaming rules.
That court also noted that the act permits the CFTC to find contracts involving gaming contrary to the public interest and prevent their listing on a designated contract market. CFTC regulation 17 C.F.R. § 40.11 currently categorically prohibits swaps involving gaming.
New Jersey’s petition contends that Kalshi’s position would effectively require uniform sports-gambling rules across states whenever the company self-certifies contracts with the CFTC. Forty-four state attorneys general have separately told the agency that it lacks authority over sports bets offered through prediction markets.
The CFTC has proposed amendments that would define “gaming,” set out how to decide when event contracts involve an underlying activity, and specify categories of contracts that may be judged contrary to the public interest. The agency said trading volume across CFTC-registered prediction markets exceeded $25 billion in 2025.
