The big-money legal battle between sports books and prediction markets continues. It feels destined to eventually land at the U.S. Supreme Court.
On Tuesday, the U.S. Court of Appeals for the Third Circuit — one level down from the highest court in the land — ruled that New Jersey may not regulate prediction markets in its state, via Reuters. The three-judge panel, by a vote of 2-1, determined that the Commodity Futures Trading Commission has exclusive jurisdiction over sports-related event contracts (i.e., bets) that are made on services like Kalshi and Polymarket.
“This is a big win for the industry and millions of users,” Kalshi CEO Tarek Mansour said on Twitter.
It’s a bigger win for Kalshi, which profits from the action.
The modern sports-betting industry was essentially born in New Jersey. The state sued to overturn a federal law that blocked states from adopting wagering on sports. When the Supreme Court sided with New Jersey in 2018, the floodgates flew open for state-by-state sports betting.
Prediction markets, in theory, fall under the jurisdiction of the federal government. If so, the states have no power over them. Kalshi sued New Jersey last year, after the state sent Kalshi a cease-and-desist letter regarding predictions based on college sports.
The dissenting judge, Jane Richards Roth, wrote that Kalshi is facilitating gambling and that its “offerings were virtually indistinguishable from the betting products available on online sportsbooks, such as DraftKings and FanDuel.”
New Jersey likely will file a motion for a rehearing, a precursor to a petition for appeal to the U.S. Supreme Court.
Meanwhile, a Nevada judge ruled on Friday that Kalshi may not offer contracts based on sporting events throughout the state. Also last week, the CFTC sued Arizona, Illinois, and Connecticut over efforts to regulate prediction markets in those states.
So, yes, the fight will likely continue until the nine justices take up the issue and cast their votes. Presumably, Kalshi and Polymarket are already offering action on what the final decision will be.
