STOCKS | New Jersey Seeks Supreme Court Review of Prediction Market Regulation

New Jersey filed a petition last week asking the U.S. Supreme Court to rule on whether sports contracts tied to prediction markets are state-regulated products or swap products overseen by the Commodity Futures Trading Commission. According to Sina Finance, the filing could clear the way for the court to take up a core legal dispute in the industry. The case centers on whether the Dodd-Frank Wall Street Reform and Consumer Protection Act overrides state gambling rules when the products trade on federally regulated designated contract markets. According to Sina Finance, the Ninth Circuit’s ruling last month conflicted with an earlier Third Circuit decision, creating a circuit split that lawyers said the Supreme Court had needed. According to Sina Finance, legal experts said the Supreme Court could still wait for other circuit courts to weigh in, but that no longer appears necessary. Chainlink Labs’ legal chief said the case would materially affect the industry’s business model and that the Supreme Court is likely to hear it. If a majority of justices decide the sports-related prediction markets are gambling products, companies offering them would need licenses and pay taxes in every state where they operate. If the court instead treats them as swap products regulated by the Commodity Futures Trading Commission, the ruling would have major implications for states and pure-play sports betting companies. The Supreme Court has about 90 days to decide whether to grant the petition, and Kalshi can respond to New Jersey’s request within 30 days after the filing. According to Sina Finance, if the court agrees to hear the case, both sides would then argue the merits. Some lawyers still think the Supreme Court may wait for rulings from the Sixth or Fourth Circuit to gather more information, or wait for the Commodity Futures Trading Commission to finish revising its prediction market rules. On Capitol Hill, the U.S. House of Representatives will be in recess for the last two weeks of September, and even if the Senate passes the Digital Asset Market Clarity Act this month, it cannot become law before the midterm elections.