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OAKLAND PARK, Fla (Gambling911.com) - As of September 3, 2026, a total of 19 U.S. states are involved to some degree in active legal proceedings concerning prediction markets.
The broader 19-state figure includes states that have initiated their own proceedings or become embroiled in litigation involving other prediction-market operators. For example, Massachusetts, Michigan, Nevada and Washington have brought civil enforcement cases, while Arizona pursued criminal charges.
Kalshi itself has gone to federal court against state authorities in 14 states.
Last week, the Ninth Circuit court ruled 3-0 against Kalshi in the Nevada litigation, concluding that its sports contracts aren't the type of "swaps" that would give Kalshi the federal preemption it claims. In practical terms, Nevada can enforce its gambling laws against Kalshi.
But the Third Circuit reached essentially the opposite conclusion as it pertains to the state of New Jersey.
On September 2, New Jersey formally petitioned the Supreme Court to hear that case.
As such, we now have a genuine circuit split over an important federal question—the sort of situation in which SCOTUS review becomes considerably more plausible.
The question is basically:
Did Congress give the CFTC exclusive jurisdiction over these contracts, thereby preempting state gambling laws, or can states still regulate them as gambling?
Another question to ask:
Can the federal government take over sports betting regulation from the states?
That latter distinction is extremely important.
Suppose Kalshi wins a favorable decision in the U.S. Supreme Court.
A Kalshi victory could result in a situation where the entire gambling sector is thrown into upheaval.
Kalshi reportedly derived 83% of its July 2026 trading volume just from sports markets. At some point, there needs to be a clear distinction between "sports betting" and the nearly identical federally regulated "event contract".
Nevada and New Jersey are arguably the two most important states in the history of modern U.S. gambling regulation.
Nevada is the country's foundational regulated-gambling jurisdiction. It legalized casino gambling in 1931.
New Jersey legalized regulated online casino gambling in 2013. Its model—online operators partnering with licensed Atlantic City casinos—became one of America's most important templates for regulated iGaming.
And it was the Garden State that spent years challenging the federal Professional and Amateur Sports Protection Act.
That litigation ultimately resulted in the landmark 2018 Supreme Court decision Murphy v. NCAA. PASPA was struck down as a result. This paved the way for individual states to begin regulating sports betting, both online and retail land-based operations.
Regulated sports betting is big business for the states. As an example, Arizona's online sportsbooks pay a 10% state tax. Sports wagering generated approximately $42.7 million for that state. Other states, like New York and New Hampshire, impose a 51% tax on operators. Ohio doubled its tax from 10% to 20% in the past year. Prediction markets like Kalshi now operate in each of these states. Their tax payment? Zero.
The Ninth Circuit's Nevada decision is fascinating because the court essentially rejected the idea that the CFTC had somehow become America's national gambling regulator.
The court concluded that Kalshi's sports contracts are not swaps covered by the relevant exclusive-jurisdiction provision and therefore Nevada's gambling laws weren't preempted.
A swap is a derivative—a financial contract whose value depends on something underlying it.
With a Kalshi event contract, it's the outcome of an event. A YES contract, which is what Kalshi and Polymarket offer, might trade at 60¢. If the Yankees win, it settles at $1; if they don't, it settles at $0.
Economically, that looks a whole lot like a sports bet. But legally, Kalshi's position is essentially: this is a federally regulated event contract/derivative traded on a CFTC-regulated exchange, not simply a sportsbook accepting a wager.
Congress created the CFTC to regulate financial derivatives—not to quietly federalize sports gambling.
Meanwhile, the CFTC's position is effectively:
Congress gave us exclusive jurisdiction over these federally regulated markets, and states can't redefine federally regulated contracts as gambling to reclaim jurisdiction.
With a Kalshi victory at the SCOTUS level, Congress could suddenly be confronted with an unintended situation where one company offers sports wagering nationwide under federal commodities law while conventional sportsbooks must navigate 30-plus different state regulatory systems and pay substantial state taxes.
At that point, doing nothing becomes increasingly difficult.
Joe Brennan, Jr, a consequential figure in the world of U.S. sports betting involved in the early New Jersey effort to legalize the activity, explained that the 3rd & 9th Circuit split only on whether to permit preliminary injunctions vs Kalshi.
"SCOTUS would only consider the question of the TROs. With no rulings on the merits regarding the law itself in either circuit, the wording of NJ’s cert petition seems premature."
The Ninth Circuit itself expressly described the question as to whether Kalshi has shown a “likelihood” that the Commodity Exchange Act preempts Nevada gaming regulations, and affirmed dissolution of the preliminary injunction because Kalshi had not made that showing.
Likewise, the Third Circuit's New Jersey case arose from the granting of a preliminary injunction. So these aren't final judgments following trials on the merits.
Since the 3rd & 9th Circuit split only on whether to permit preliminary injunctions vs Kalshi, SCOTUS would only consider the question of the TROs. With no rulings on the merits regarding the law itself in either circuit, the wording of NJ’s cert petition seems premature https://t.co/UEAOfWmSCZ
— Joe Brennan Jr (@joebrennanjr) September 2, 2026
The appellate courts nevertheless had to interpret the actual federal statute to decide whether Kalshi was likely to succeed.
And they reached opposite legal conclusions.
The Third Circuit called Kalshi's offerings "swaps". The Ninth Court disagreed with that ruling, even going as far as to reference it in its own determination. It concluded that Kalshi's sports contracts are not swaps and that Kalshi was not likely to establish federal preemption of Nevada gambling law.
Some might argue the New Jersey petition is premature.
Brennan, Jr. went on to explain further.
"The 9th Circuit ruling also remanded the case back to the lower court, so this Supreme Court - which has been a stickler for process - is unlikely to jump in and take this over until the lower courts do this, and then it makes its way back through the appellate court."
Neither circuit's decision represents a final merits judgment following completion of the underlying litigation.
The Ninth Circuit itself states that its jurisdiction arose under 28 U.S.C. §1292(a)(1)—the statute permitting interlocutory appeals involving injunctions—and describes the question as whether Kalshi demonstrated a “likelihood of success on the merits.”
The speculation, widely shared among industry analysts monitoring the current situation on the prediction market front, believe SCOTUS will wait for the underlying Kalshi lawsuits to reach final judgments on the merits.
The more likely conventional path: District court proceedings followed by a final merits judgment then appeal of that final judgment with the Circuit Court merits decision following and ultimately the Supreme Court petition.
SCOTUS would be reviewing a final decision about what the law actually means, rather than appellate decisions addressing whether Kalshi is likely to win while the litigation continues. Not that SCOTUS has to wait.
The Ninth Circuit has already squarely interpreted the statute and concluded that Kalshi's sports contracts aren't “swaps,” expressly disagreeing with the Third Circuit. As such, New Jersey can argue there is already a mature circuit split worth resolving now.
Because both appellate rulings arose at the preliminary-injunction stage rather than following final judgments on the merits—and portions of the Nevada litigation remain pending—the Supreme Court could decide that review is premature and allow the cases to develop further in the lower courts. However, the direct circuit split over the interpretation of the Commodity Exchange Act gives the Court a significant reason to intervene now.
New Jersey, we should note, is asking SCOTUS to review the Third Circuit case, not the Ninth Circuit case. The Nevada remand therefore doesn't itself prevent the Court from granting New Jersey's cert petition. New Jersey filed its petition precisely because it now has a conflicting appellate interpretation to point to.
And in case you were wondering, Polymarket does indeed have a market on whether SCOTUS hears this case by the end of 2026, with a 45% chance of the high court doing so.
With that said, SCOTUS generally prefers to review final judgments, and Supreme Court practice recognizes that interlocutory cases—cases still proceeding below—are less attractive vehicles. The Court has repeatedly said that it generally waits for final judgment absent extraordinary circumstances.
Renowned gambling attorney Daniel Wallach agrees with this assessment.
"Early circuit split may not be enough for cert grant in NJ prediction markets case. SCOTUS generally prefers to let issues “percolate” in COAs before stepping in. Mature circuit split > shallow split. Plus CFTC rulemaking, APA suits and CEA amendments may change legal landscape."
Early circuit split may not be enough for cert grant in NJ prediction markets case. SCOTUS generally prefers to let issues “percolate” in COAs before stepping in. Mature circuit split > shallow split. Plus CFTC rulemaking, APA suits and CEA amendments may change legal landscape.
— Daniel Wallach (@WALLACHLEGAL) September 3, 2026
The Supreme Court itself, however, identifies conflicting circuit decisions and questions of national significance as classic reasons for granting cert. That is essentially what we have here.
And this isn't just some ordinary preliminary-injunction dispute.
New Jersey contends that at least 20 states, dozens of cases are active, and 44 states have participated in opposition to Kalshi's legal theory in one form or another.
SCOTUS could take the New Jersey case this term due to that state's enormous economic consideration. New Jersey says U.S. sports betting generated $16.89 billion in revenue in 2025, while sports contracts reportedly account for the overwhelming majority of Kalshi's business.
- Alejandro Botticelli, Gambling911.com
