Supreme Court term opens with prediction markets on its docket

New Jersey filed its petition on a Tuesday. By Thursday, the National Council of Legislators from Gaming States had filed an amicus brief behind it. That is not how you behave when you expect to lose.

The Supreme Court's new term begins next week, and the justices will decide whether to hear a cluster of disputes that have spent two years producing contradictory answers in the lower courts. The core question — whether sports-based event contracts offered by platforms like Kalshi, Robinhood, and Crypto.com are federally regulated derivatives or state-regulated gambling — has now been answered differently by two federal circuits, and that split is exactly the kind of disorder the Court exists to resolve.

The Third Circuit found in April that federal law likely displaces New Jersey's attempt to apply its gambling statutes to Kalshi's sports contracts. The Ninth Circuit reached the opposite conclusion in August, allowing Nevada to enforce its gaming laws against those same categories of contracts. Two circuits, two answers, one product. The NCLGS brief argues that allowing federal preemption to proceed without the Court's intervention would unravel decades of state regulatory architecture, not just for prediction markets but for the broader gambling framework that sits beneath them.

The CFTC has not been a passive observer. The agency has taken the position that its jurisdiction under the Commodity Exchange Act covers event contracts that meet the definition of swaps, and it has backed that position with enforcement — filing suits against state regulators who moved to restrict platform operations. The Trump administration has aligned itself with that federal approach. That alignment matters procedurally: when an agency and the executive branch are pulling in the same direction, cert petitions from the other side face a steeper climb. But the circuit split is what it is, and the Court has limited tolerance for letting contradictory circuit holdings stand in an area with this much commercial volume.

The preemption argument rests on the Supremacy Clause and on the specific language of the CEA, which reserves regulatory authority over commodity interests to the federal government. States counter that sports wagering is not a commodity interest — that the CFTC's own historical rules explicitly excluded gaming contracts from exchange trading, and that redefining the category now, at scale, requires more than agency assertion. They are not wrong that the agency's current posture represents a significant shift from its prior position. Whether the Court views that shift as permissible agency interpretation or as an overreach beyond the statutory grant is the legal question that has not yet had a clean answer.

The standard the Court will apply, if it grants cert, is whether the CEA's preemption provisions are broad enough to displace state gambling law as applied to contracts whose underlying event is a sporting contest. That requires the Court to decide whether the category "commodity" stretches to cover a baseball game's outcome — and whether Congress, when it wrote the CEA's preemption language, intended to reach that far.