New Jersey's Supreme Court petition sets up a circuit split ruling

Jennifer Davenport had a problem with arithmetic. Civil enforcement actions in at least twenty states, two federal appeals courts pointing in opposite directions, and a prediction market platform operating as though none of it applied to it. On Wednesday, New Jersey's Attorney General filed a petition for a writ of certiorari asking the Supreme Court to resolve what the Third and Ninth Circuits could not agree on: whether sports event contracts offered by a CFTC-registered exchange are federal swaps, or state-regulated wagers.

The split itself is the story. The Third Circuit ruled two-to-one in April that the Commodity Exchange Act preempts New Jersey's gaming laws — Kalshi wins, state regulators stand down. Then the Ninth Circuit, in a unanimous three-to-zero decision out of Nevada, reached the opposite conclusion: the same contracts are not swaps under the same statute, and states retain authority over them. Two circuits, one company, irreconcilable outcomes. Davenport's forty-seven page filing frames this not as a dispute about a single platform but as a question of whether Congress, in a 2010 financial reform bill, accidentally federalized the entire American sports betting industry without anyone noticing.

That framing is deliberately aggressive, and it is probably right on the legal facts even if wrong on the outcome. Dodd-Frank was a response to the 2008 financial crisis. The provision that Kalshi relies on was written for interest rate derivatives and credit default swaps. Whether it reaches a contract on who wins the NFC Championship is genuinely ambiguous — which is precisely why the circuits split, and precisely why the Supreme Court is the only institution capable of ending this.

The consensus read is that the Court will grant certiorari. Circuit splits on questions of federal preemption, involving this volume of downstream litigation across this many states, are exactly what the Court exists to resolve. I don't dispute that. Where I diverge from the current market lean is on what the Court will actually do with the question once it has it.

The states' strongest ground is not the gaming argument — it's the statutory argument. Davenport is not asking the Court to rule that gambling is bad or that Kalshi is a casino. She is asking it to rule that Congress did not preempt state sports-gambling laws in the Dodd-Frank Act, because there is no evidence Congress intended to. That is a textualist argument, and it lands well with the current Court's composition. The Ninth Circuit's unanimous panel made exactly this move. I have watched preemption cases where the industry assumed federal law would hold and found that a Court committed to statutory text reads silence as silence, not as intent.

Kalshi's position requires the Court to accept that a 2010 financial reform statute quietly displaced a hundred and fifty years of state gaming regulation without a word in the legislative record saying so. That is a large ask. The company is better positioned on the CEA's explicit preemption clause than on implied preemption, but the clause's scope is precisely what the circuits disagreed about.

There are two things that would revise my view. The first is if the CFTC files a brief arguing strongly for its own jurisdiction — agency deference is diminished post-Chevron but not extinguished, and a clear CFTC position supporting Kalshi changes the statutory interpretation calculus. The second is if the Court's eventual grant comes with language suggesting it wants to affirm the Third Circuit rather than resolve genuine ambiguity. Neither has happened yet, and the petition was filed forty-eight hours ago.

Davenport also noted the implications for tribal gaming operations, which hold state licences and have spent decades building regulatory frameworks under state authority. That is not a legal argument — it is a political one. But Supreme Court justices read briefs from twenty-plus states on both sides of the ideological spectrum, and the breadth of that coalition will register.