Crypto.com and Robinhood take Nevada preemption fight to Supreme Court

Justin Wales, Crypto.com's chief legal officer, filed a petition with the Supreme Court on Friday and described it in terms that were careful and precise: the company wanted clarity on who regulates federally registered prediction markets. The language was measured. The underlying situation is not.

The filing came within days of Robinhood submitting its own petition on the same question. Both companies have suspended sports event contracts for Nevada residents while they wait. That suspension is the real tell — not the legal argument, but the business decision behind it. A company that believed it would win quickly does not pull its product.

What Wales and Robinhood are asking the Court to settle is a split that is already visible in the circuit courts. The Ninth Circuit ruled unanimously that sports event contracts are sports wagers, not swaps, and that the Commodity Exchange Act therefore does not preempt Nevada's authority to regulate them as gambling. The Third Circuit reached the opposite conclusion in May, ruling two-to-one that the contracts are financial instruments under exclusive CFTC jurisdiction. One circuit says these are bets. The other says they are derivatives. The Supreme Court will eventually have to pick one of those answers, and until it does, every state attorney general in the country is reading the Ninth Circuit.

The Ninth Circuit decision is the one doing the most damage right now. Kalshi has separately petitioned for an en banc rehearing with eleven judges rather than the three-judge panel that ruled unanimously against it. That the panel was unanimous matters. A two-to-one split invites a rehearing argument more naturally than a clean sweep does. Kalshi is asking eleven judges to reverse what three found obvious.

The consensus read on this situation is that the industry is in a strong position because the CFTC has publicly supported the platforms' effort to get judicial clarity. I don't think that support carries the weight the filings imply. A regulator expressing a view in an amicus posture is not the same as a court finding that the regulator's jurisdictional claim is correct. The Third Circuit had the CFTC's position in front of it and still ruled two-to-one. The dissent in that case — Judge Roth's argument that the contracts are indistinguishable from traditional sports betting — is the reasoning the Ninth Circuit adopted in full.

I am adjusting here for my own tendency to find the downside when the upside is more probable. Even accounting for that, the path to a clean Supreme Court preemption victory looks harder than the industry's public posture suggests. The question the Court will face is whether Congress, when it wrote the Commodity Exchange Act, intended to immunize sports outcome contracts from state gaming law. The Ninth Circuit said no. The Third Circuit said yes. The Court will not find it obvious.

What the platforms have built, while this plays out, is a patchwork: suspended in Nevada, suspended in Michigan following a separate court order, facing cease-and-desist orders in Connecticut that now cover nine platforms, and watching Iowa, Utah, and Illinois each develop their own theories. The federal preemption argument was always the industry's only exit from that patchwork. The Ninth Circuit closed one door. Kalshi is asking eleven judges to reopen it. Crypto.com and Robinhood are asking nine justices to walk through a different one entirely.