New Jersey petitions Supreme Court to hear sports betting market case

New Jersey formally submitted a petition Supreme Court decide whether sports prediction markets are exempt from state gambling laws.

The State is appealing Third circuitwhich ruled in Kalsha’s favor in May. At the time, New Jersey said it would appeal to the Supreme Court. Ninth CircuitLast week’s ruling against Kalsha has left the district divided.

In its petition, New Jersey said the split means the Supreme Court’s decision “is necessary to provide lower courts, states, prediction markets, the CFTC, tribes and casinos with a final answer.”

There is about a 50% chance that SCOTUS will take up the case this year.

At least 4 of the 9 Supreme Court justices must vote to grant certiorari in order for the court to hear the case. Polymarket suggests to the market as to when SCOTUS will take up a case on sports contracts. After the Ninth Circuit’s decision, the odds rose to 52% but have since fallen to 46%.

The Supreme Court receives only about 100 cases a year, less than 5% of all petitions. The decisions of the Third and Ninth Circuits are not final decisions, and so the Court can “wait for a more procedurally developed case,” the former said CFTC Regulator Carl Kennedy.

Kalshi says rule review is coming

In response to a petition from the State of New Jersey Kalshi Representative Dani Lever stated, “We disagree with New Jersey’s claim. 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 overrides state law.”

The Third Circuit ruled 2-1 in Kalsha’s favor, with one dissenting judge noting that the platform promotes gambling and should be subject to state gambling laws.

The Ninth Circuit ruled unanimously against Kalshi, with all three judges ruling that his sports contracts constituted sports betting. The ruling cites CFTC rules that say the agency can ban gambling contracts if it deems them contrary to the public interest.

The rule’s vague language has been the subject of countless lawsuits, with Kalshi and the CFTC arguing that it gives the CFTC the authority to regulate sports and other markets. The states argue that the rule is evidence that Congress did not intend to allow federal regulation of sports markets.

“Nothing in the Act gives the CFTC unprecedented powers. “to become the sole sports gambling regulator in this country, especially gives companies the opportunity to opt out of the laws of the 50 states by independently certifying their bets in a CFTC-registered marketplace,” New Jersey’s petition states.

Lever said the Ninth Circuit’s other interpretation is:based on regulation that is in the process of being rewritten.”

Kalshi General Director Tarek Mansour also said there could be a change in CFTC rules in the near future to clarify that sports contracts are permitted. Debate continues over whether the CFTC has enough authority to rewrite its rules without explicit support from Congress.

No consensus on Supreme Court verdict

How the Supreme Court’s decisions could have huge implications for the future of sports betting in the US. There is no clear consensus on the decision the court will make.

Circa Sports CEO Derek Stevens told CasinoBeats last week that he believes there is too much opposition among the states for the court to rule in Kalsha’s favor.

“I believe that 44 of the 50 state attorneys general are involved in litigation against prediction markets. I think too much money will be lost. I still believe a more reasonable outcome will be achieved,” Stevens said.

He pointed to the tax revenue that states currently collect from sports betting that could potentially be lost.

“New York State will lose over $1.5 billion in tax revenue. Illinois State will lose an enormous 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 with huge holes in their budgets.”

Lawyers also have differing opinions about how influential the Ninth Circuit’s decision will be. Professor of Law Melinda Roth outlined examples of arguments that Kalshi could draw from the decision to support his position. Stephen Pipgrass A representative from the law firm Troutman Pepper Locke told CasinoBeats that the Supreme Court has often opposed the Ninth Circuit recently.

Gaming lawyer Daniel WallachHowever, he said many of the arguments in the Ninth Circuit’s ruling make Kalshi’s case difficult to deal with. All the judges said Kalshi Sports Markets did not qualify for exchange under the Commodity Exchange Act (CEA).

Additionally, Wallach said the Essential Questions Doctrine requires that federal agencies have clear and express authorization of Congress change the rules with enormous “economic and political significance”. Considering that Kalshi is valued at approximately $40 billion and states receive revenue from sports betting, there is no doubt that this issue will have huge economic implications.

“This issue has enormous practical and legal implications: Kalshi seeks to federalize the multibillion-dollar sports betting industry through all state sports gaming laws,” the New Jersey petition states.

This is perhaps the ideal scenario, which Kalshi argues allows companies facing potentially huge economic consequences to hedge their bets. At this time, the platform has not joined Polymarket in creating any markets on this topic.