Gaming regulators urge Supreme Court to take up Kalshi dispute
IAGR and NAGRA filed a joint amicus brief backing New Jersey's bid for Supreme Court review of whether federal derivatives law shields Kalshi's sports event contracts from state gambling rules.
The International Association of Gaming Regulators and the North American Gaming Regulators Association have asked the U.S. Supreme Court to hear New Jersey's case against Kalshi, filing a joint amicus brief on 2 October in Flaherty v. KalshiEX.
The brief argues that the Commodity Exchange Act does not allow a sports wager to escape state gambling law simply because it is listed as an event contract on an exchange registered with the Commodity Futures Trading Commission, according to SBC Americas. The groups told the Court that the split between circuits is itself the most pressing issue requiring resolution.
The Third Circuit Court of Appeals ruled in Kalshi's favour in April, while the Sixth and Ninth Circuits have since sided with states seeking to enforce their gambling laws. The brief notes that identical contracts from the same company, under the same federal registration, are currently blocked from state oversight in one circuit while remaining subject to it in two others.
This is the second amicus brief supporting New Jersey's petition, which was lodged in September. The National Council of Legislators from Gaming States filed the first, on 22 September.
IAGR President Ben Haden said regulators need clarity on their authority to enforce established consumer safeguards and the boundaries their jurisdictions have set on gambling, according to a release cited by SBC Americas.
Haden said the brief pushes back on the idea that labelling a sports wager an event contract removes it from state gambling oversight, warning that without regulatory protection, underage access, inadequate tools for problem gamblers, and risks to sporting integrity all become more likely.
Much of the filing details what state regulators actually do that could be undermined, including licensing and suitability checks, approval of events and wager types, integrity monitoring, age verification, self-exclusion programmes, prohibited-participant rules, access to operator records, and enforcement against unlicensed activity. The brief cites regulations from Ohio, Illinois, Massachusetts, Tennessee, Nevada, New Jersey and Colorado.
The groups also argue that integrity monitoring requires visibility across an entire market, and that wagering activity moved outside the regulated system becomes activity regulators can no longer use to spot manipulation of underlying events.
Tribal gaming features prominently, reflecting NAGRA's tribal regulator membership. The brief points out that sports betting is classed as Class III gaming under the Indian Gaming Regulatory Act, and that states including Maine and Michigan have reserved part or all of their mobile betting markets for tribes. If the same product can reach the same customers outside those compacts, the brief states, tribal regulators lose the ability to enforce the terms tribes negotiated for their gaming rights.
The Third Circuit's decision remains Kalshi's only appellate win to date. That panel concluded the contracts likely qualify as swaps, with federal law likely overriding New Jersey's sports-betting statutes as a result.
In August the Ninth Circuit found Nevada's gaming laws apply to sports event contracts offered through prediction markets, and in September it also ruled for tribes seeking to bar such contracts on tribal land. The Sixth Circuit, also in September, cleared Ohio and Tennessee to enforce their gambling statutes against the contracts, holding that the Commodity Exchange Act would not preempt those laws even if the products were deemed swaps.
Further rulings are pending: the Fourth Circuit heard arguments on Maryland's case in May, and New York's appeal remains before the Second Circuit. The brief contends that additional circuit decisions will not resolve the conflict but instead add more jurisdictions operating under contradictory rules.
New Jersey's is not the only petition before the Court. Robinhood and Crypto.com have separately asked for review of their Ninth Circuit loss to Nevada, while Kalshi itself has not petitioned the Supreme Court, instead seeking a full Ninth Circuit rehearing of the Nevada case.
The Supreme Court opened its new term on Monday without including prediction markets among its initial docket of cases.