AGA Backs New Jersey in Supreme Court Petition Over Kalshi Sports Contracts

The American Gaming Association has filed a brief urging the U.S. Supreme Court to review a ruling that prevents New Jersey from enforcing its gaming laws against Kalshi sports event contracts.

The AGA argues that prediction-market sports contracts function as sports betting, while operating without the customer protections, state regulation and tax contributions associated with licensed sportsbooks.

New Jersey’s petition asks the justices to consider whether the Dodd-Frank Act displaced states’ authority to regulate sports bets offered through markets registered with the Commodity Futures Trading Commission.

The association says its members have built their businesses under a framework in which state and tribal governments regulate sports betting.

"In its view, the Third Circuit’s decision allows prediction markets to offer sports betting nationally without following those governments’ gaming laws, creating competitive harm for operators that must meet licensing and compliance requirements," the AGA said in its filing.

The dispute adds a major industry voice to a legal question over whether federally registered prediction markets can offer sports-related contracts outside state and tribal gambling frameworks.

A bipartisan group of 39 state attorneys general, led by Ohio Attorney General Andy Wilson, also backed New Jersey's petition, arguing that gambling regulation falls within states’ traditional authority to protect the public.

The NFL also filed in support, raising concerns about game integrity and arguing that prediction-market operators lack safeguards equivalent to those used by licensed sports betting operators.

The filings come as prediction markets see record trading volumes driven by sports.

Last weekend, NFL and NCAA games boosted trading volumes at Kalshi Inc. and Polymarket to a two-day total of $8.56 billion, according to Dune Analytics, with their combined weekly volume reaching a record $22.2 billion.

More than 80% of Kalshi's volume came from sports trades in September, and the company is considering a potential IPO after a financing round valued it at about $40 billion.

Prediction markets are federally classified as exchanges, allowing them to avoid state taxes on traditional gambling as well as age and location restrictions on sportsbooks.

Kalshi says its products shouldn't be considered gambling because it operates as an exchange and doesn't take the other side of customers' trades.

"Sports trading on regulated prediction markets offer a fairer choice to consumers, with no 'house' that restricts winners and hooks people the more they lose," said Elisabeth Diana, Kalshi’s head of communications.

At least 44 states, including New York, Arizona and Connecticut, argue the sports contracts are illegal gambling subject to state law.

The CFTC has sued states seeking to enforce their gambling laws against federally regulated exchanges, and federal appeals courts have split over the response, increasing the likelihood the Supreme Court will step in.

If the justices grant review, a decision would likely come sometime in 2027.

A ruling for the states could force prediction markets to comply with state licensing, taxes and gambling restrictions.

"If prediction markets are successful at the Supreme Court, then basically the sports betting regulatory regime as it exists could basically cease to exist," said John Holden, an associate professor in business law at Indiana University.