Supreme Court to review split circuit court rulings on prediction markets

Circuit courts are splitting on prediction markets as Supreme Court review looms

Joe Webster counted eighty cases on Wednesday — state courts, federal courts, tribes against operators, operators against states, class actions running parallel to injunctions — and said the number that mattered most was eighty-five. That is the percentage of decisions going against prediction markets so far, and Webster, a partner at Hobbs Strauss speaking during the Indian Gaming Association's New Normal webinar, described it as an "incredible 18 months of litigation" without suggesting the pace would slow.

It won't. The architecture of this fight has shifted from whether prediction markets can operate to which court ultimately decides whether they can operate at all, and that distinction is doing significant work.

The Third Circuit ruled two-to-one in May that Kalshi's sports event contracts are swaps under exclusive CFTC jurisdiction, blocking New Jersey's cease-and-desist order. Webster said New Jersey is expected to petition the Supreme Court for review by September 3. Whether the high court takes that case or waits for a cleaner vehicle is genuinely open. Webster thinks there is reason to believe it might. I think he is understating the pull.

Here is the mechanism that makes this almost certain to reach the Court rather than merely likely: Webster flagged that the Fourth, Sixth, and Ninth Circuits have all fully briefed cases where decisions could arrive any day. He expects a circuit split. A split of that breadth — four circuits touching the same preemption question — is not something the Supreme Court historically leaves to resolve itself through attrition. The justices take cases to settle law, and unsettled law across half the federal appellate system is precisely the condition that triggers review.

The consensus read on this litigation, as it appears in most coverage, treats the eighty-five percent state-court loss rate as the dominant signal — prediction markets are losing, states are winning, the legal environment is hostile. I don't think that's where this lands. State-court losses don't bind federal preemption doctrine. The Third Circuit's two-to-one majority and Judge Roth's dissent are more instructive than any state ruling, because they map the exact fault line the Supreme Court will have to resolve: are these instruments swaps or bets, and does the answer to that question belong exclusively to federal law.

I have watched regulatory preemption fights move through the courts before. The pattern that matters is not the early win rate — it is who controls the question being asked. Right now, prediction markets have succeeded in making this a federal question. That is the harder structural win, and it happened before most people were paying attention to the case count.

What the tribal gaming industry understands, and what Webster's framing makes clear, is that the stakes extend well beyond Kalshi's balance sheet. Tribes hold exclusive gaming compacts in multiple states. A Supreme Court ruling that locks sports event contracts inside CFTC jurisdiction removes those contracts from the regulatory perimeter that protects tribal revenue entirely. That is why eighty cases exist. That is why the loss rate at the state level is so high — states and tribes are fighting on the terrain where they have tools, because they understand what a federal ruling costs them.