New Jersey asks US Supreme Court to hear prediction markets dispute
The state of New Jersey has asked the US Supreme Court to hear a case that could determine whether prediction markets will be controlled by states or federal authorities. This concerns, in particular, contracts linked to sporting events, CNBC Top News reports.
Conflicting appellate court rulings
In its petition, New Jersey asks the Court to review an April ruling by the US Court of Appeals for the Third Circuit. The court concluded that all event contracts are a type of derivative regulated at the federal level by the US Commodity Futures Trading Commission (CFTC).
The petition states that under this approach, companies could argue that state sports betting laws do not apply if they offer such bets on a CFTC-registered market. New Jersey Attorney General Jennifer Davenport said that Congress did not exempt the sports betting industry from state legislation.
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Positions of states and the federal regulator
New Jersey's appeal became another stage in the dispute between the CFTC and dozens of states over authority to oversee prediction markets. The CFTC considers contracts linked to sporting events to be swaps. At the same time, attorneys general from 44 states argue that such contracts are effectively sports bets and should be regulated by states.
The petition was filed after a ruling by the US Court of Appeals for the Ninth Circuit, which reached the opposite conclusion: contracts on sporting events are not swaps regulated by the CFTC. The court also rejected appeals by Kalshi and Crypto.com regarding preliminary injunctions against the Nevada Gaming Control Board.
Bank of America noted that the split between the Third and Ninth Circuit rulings gives the Supreme Court an opportunity to consider the question of the regulator for prediction markets. At the same time, the bank suggested that the Court may postpone hearings until next year because of pending cases in other federal circuits. After the petition was filed, shares of DraftKings and Flutter Entertainment, FanDuel's parent company, rose by more than 5%.
