New Jersey's petition asking whether Dodd-Frank preempts state sports betting law reached the Supreme Court on September 2, and the first amicus brief was docketed three weeks later. The clerk has since pushed the deadline for a response to November 9, which keeps the petition off the justices' conference list until late November at the earliest.
The Supreme Court docketed the first amicus brief in New Jersey's challenge to Kalshi on September 22, and on the same day moved the deadline for a response to the underlying petition to November 9. The case is Flaherty v. KalshiEX, LLC, No. 26-299, and it asks the justices to settle a question two federal appeals courts answered in opposite directions this year.
New Jersey filed its petition for a writ of certiorari on September 2, after Justice Samuel Alito granted two extensions that carried the original July 5 deadline to September 3. The question presented reads: “Whether the 2010 Dodd-Frank Wall Street Reform and Consumer Protection Act preempted States from regulating sports bets that occur within their jurisdictions if those bets are offered on markets registered with the Commodity Futures Trading Commission.” The petition lists Mary Jo Flaherty, interim director of the New Jersey Division of Gaming Enforcement, and state Attorney General Jennifer Davenport as petitioners. Jeremy Feigenbaum is counsel of record for New Jersey. Neal Katyal of Milbank is counsel of record for Kalshi.
The docket originally set a response for October 8. A motion to move that date to November 9 was submitted to the clerk on September 18 and granted on September 22; the entry does not name who asked for it. A brief in opposition is the respondent's filing, so the deadline is Kalshi's. Under the Court's rules, the clerk distributes a petition to the justices once the brief in opposition is filed, and then no less than 14 days later unless the petitioner waives that wait. A response filed on the new date would not reach a conference until the second half of November at the earliest.
The disagreement the petition points to opened in April, when a Third Circuit panel ruled 2-1 that the Commodity Exchange Act preempts New Jersey's gambling laws as applied to Kalshi's sports event contracts. Judge David Porter wrote for the majority, joined by Chief Judge Michael Chagares, holding that the contracts meet the act's definition of swaps and that its preemption provision bars states from regulating swaps traded on a designated contract market. Judge Jane Roth dissented. “Basic abductive reasoning tells us that if it looks like gambling, talks like gambling, and calls itself gambling, it's gambling,” she wrote in the opinion, arguing that the presumption against preemption applies with force in an area states have policed for generations.
In August a unanimous Ninth Circuit panel reached the opposite result in Nevada's case, holding that a contract on a football game is a bet rather than a swap and that the state was entitled to regulate it. That panel accepted the preemption principle and rejected its application, which is what makes the split narrow and hard to paper over. Both courts agree the act preempts state regulation of swaps traded on a registered exchange. They disagree about whether a sports contract is one.
The petition makes three arguments for review. It calls the split acknowledged and irreconcilable, quoting the Ninth Circuit's statement that “The Dodd-Frank Wall Street Reform Act cannot be read as a direct (or indirect) regulation of sports gambling,” and counting roughly twenty places where that opinion rejected the Third Circuit's methodology. The count is the petitioner's own. It argues the question is exceptionally important because a multibillion-dollar industry turns on it and because states have regulated gambling under their police powers for more than 150 years. And it argues the Third Circuit's statutory reading was wrong on its own terms.
The amicus brief came from the National Council of Legislators from Gaming States, an organization of state lawmakers, and supports the petition. Marc Dunbar is counsel of record, joined by William Hall III and Marc Ellinger. Its central section is headed “States are the traditional and intended regulators of gambling activities,” and it argues that Congress “has deferred to the states on gaming regulation in a significant and unique manner.” Rendering states powerless to regulate a product marketed as “sports betting” would cause “substantial harm and confusion,” the brief says, naming state gaming regimes, tribal gaming compacts and the sports betting laws states wrote after Murphy v. NCAA.
A trip to the Supreme Court is what the Commodity Futures Trading Commission asked for. Within hours of the Ninth Circuit ruling, agency spokesman Zach Fulton said in an emailed statement that the decision had “teed up a circuit split that calls out for resolution by the Supreme Court.” The commission has not waited for one. It ordered Kalshi to keep trading through New York's $36 billion suit in August under the emergency authority in Section 8a(9) of the Commodity Exchange Act. Congress has not closed the gap either: Senate Banking Democrats asked on September 23 for a public hearing on prediction markets after committee Republicans met privately with Kalshi's chief executive.
Nothing on the docket commits the Court to hearing the case. A petition is pending, one amicus brief supports it, and the respondent has until November 9 to file in opposition. Until the justices act, the Third Circuit's April decision governs in its circuit and the Ninth Circuit's August decision governs in its own, which leaves the same product lawful for a federally registered exchange to offer in New Jersey and regulable by the state in Nevada.
