The NFL and 39 States Ask the Supreme Court to Take New Jersey’s Kalshi Case

The National Football League and 39 state attorneys general have asked the US Supreme Court to hear New Jersey‘s appeal against Kalshi, the prediction market that says federal law puts its sports contracts out of reach of state gambling regulators. The states filed their brief on October 7 and the NFL submitted its own a day later. The court hasn’t agreed to hear the case.

New Jersey’s petition, No. 26-299, was filed on September 2 by the state’s attorney general and the interim director of its Division of Gaming Enforcement. It targets an April 6 decision in which the Third Circuit upheld, by a 2-1 vote, an injunction that stops the state from enforcing its sports betting laws against Kalshi. The court’s docket shows Kalshi’s response was due on October 8 until the deadline was pushed to November 9.

One Question, Three Different Answers

The petition asks one thing: “Whether the 2010 Dodd-Frank Wall Street Reform and Consumer Protection Act preempted States from regulating sports bets that occur within their jurisdictions if those bets are offered on markets registered with the Commodity Futures Trading Commission.” Dodd-Frank gave that agency, the CFTC, “exclusive jurisdiction” over swaps. Kalshi says its sports contracts are swaps.

The Third Circuit agreed. The Ninth Circuit did not. On August 28 it ruled for Nevada, finding that Kalshi “did not show a likelihood” that federal law preempts state gaming rules for its sports contracts, and it ruled against Kalshi again on September 16 in a case brought by tribes.

Then came the Sixth Circuit. On September 25 it held that Kalshi’s contracts don’t meet the definition of a swap, and that federal law “neither expressly nor impliedly preempts” the gambling laws of Ohio or Tennessee.

“The Circuits Are Fractured”

The states’ brief carries the name of Ohio Attorney General D. Andrew Wilson and is signed for Ohio, 38 other states and the District of Columbia. Its complaint is that the three appeals courts can’t even agree on why. It says “the circuits are fractured. And they are not split only on outcome. They are divided on all possible modes of analysis.”

The brief is blunt about Kalshi’s theory. “The prediction markets are wrong,” it says. “They cannot strip the States of their core sovereign power through relabeling and window-dressing.”

Ten states are not on the signature pages: Alaska, Florida, Georgia, Indiana, Kentucky, Montana, North Dakota, Tennessee, Texas and Washington. New Jersey is the petitioner, so it isn’t there either.

The NFL Wants an Answer This Season

The NFL’s brief, dated October 8 and signed by lawyers including William P. Barr of Torridon Law, puts a number on its interest. On the first Sunday of this season, it says, $1.8 billion of the $3.3 billion traded across all prediction markets was tied to NFL games.

The league wants a ruling fast. “It is important that this Court grant certiorari now to provide clarity before another NFL season goes by,” the brief says. It also takes a side, saying that “the NFL believes the Sixth and Ninth Circuits got it right.”

Most of the brief is a list of grievances with the CFTC. The league says the agency has declined to adopt its list of prohibited wagers and lets 18-year-olds trade sports contracts, when states generally set the minimum age at 21. It counts 543 employees at the CFTC for the whole country, against close to 400 each at the gaming regulators in Nevada and Pennsylvania.

Dodd-Frank’s Authors Say It Wasn’t About Betting

Two men who helped write the law filed separately. Gary Gensler, who chaired the CFTC from 2009 to 2014, told the court that “Congress did not transfer jurisdiction over sports betting from the States to the CFTC.” He added that the late Senate Majority Leader Harry Reid of Nevada “would never have consented” to a law that did.

Christopher Dodd, the former Connecticut senator whose name is on the act, wrote that “Congress did not set out to authorize nationwide sports betting through derivatives markets.”

They have company. The docket also lists briefs from the Cabazon Band of Cahuilla Indians, the American Gaming Association, the Casino Association of New Jersey, two associations of gaming regulators and a group of 145 tribes and tribal organizations.

One Brief Wants Murphy Reopened

Stop Predatory Gambling and two other nonprofits went further. Their brief asks the justices to use the case to revisit Murphy v. NCAA, the 2018 decision that freed states to write their own gambling laws on sports. They call its reasoning a “much-criticized non-severability analysis.”

The states’ brief says more rulings are on the way. Cases are pending at the Second, Fourth, Seventh, Eighth and Tenth Circuits and at the Massachusetts Supreme Judicial Court, including appeals from Kalshi’s losses in Utah and Iowa. A second petition, No. 26-344, has reached the justices from the Ninth Circuit.

New Jersey’s petition counts at least 39 lawsuits across 20 states over the same question. Kalshi has until November 9 to file its brief in opposition.