Developing Thirty-Nine States Are Backing New Jersey. One of Its New Allies Is Asking the Court to Undo the Case New Jersey Won

Editor's note: TrueEdge builds odds tools and earns affiliate commissions from licensed sportsbooks. This piece argues a position on prediction-market regulation. Weigh it accordingly.

By Friday afternoon the amicus column in Flaherty v. KalshiEX, LLC, No. 26-299, had ten entries on it. The National Council of Legislators from Gaming States went first, on September 22. Then international and North American gaming regulators on October 2, the Cabazon Band of Cahuilla Indians on October 6, Ohio and thirty-eight other states and the District of Columbia on October 7, the National Football League and 145 tribes and Gary Gensler and Christopher Dodd and the American Gaming Association on October 8, and the Casino Association of New Jersey on Friday, October 9.

That is an overwhelming show of force by the count. Read the filings and it is something stranger: a coalition whose members want incompatible things, one of which is the destruction of the industry most of the others are trying to protect.

The ask nobody is quoting

Also filed on October 7, about two hours before Ohio's went up: a brief from Stop Predatory Gambling, the Association of American Physicians and Surgeons, and Texans Against Gambling, signed by a solo practitioner in Far Hills, New Jersey, named Andrew L. Schlafly.

Part I is what you would expect — the public-health case against sports gambling, former Surgeon General Jerome Adams calling it "the new opioid crisis," a Siena/St. Bonaventure survey finding 52% of men aged 18 to 49 hold an active sportsbook account, Ammianus Marcellinus on the fall of Rome.

Part II is not what you would expect. It asks the Court to grant certiorari and add a question: "Whether the Severability Analysis in Murphy v. NCAA Correctly Struck 28 U.S.C. § 3702(2)."

Here is why that sentence should stop anyone in this industry cold. PASPA had two operative provisions. Section 3702(1) barred states from authorising sports betting; that is the one New Jersey challenged and the one the Court held unconstitutional in 2018 on anticommandeering grounds. Section 3702(2) barred persons from operating a sports-wagering scheme "pursuant to the law or compact of a governmental entity." Nobody challenged 3702(2). The Murphy majority struck it anyway, on the theory that Congress would not have wanted it to survive alone.

Revive 3702(2) and you have not restored state authority over sports betting. You have federally prohibited every state-licensed sportsbook in the country — DraftKings in Ohio, the Borgata's book in Atlantic City, the tribal operations run under compacts negotiated with the states now signing these briefs. The Casino Association of New Jersey filed on Friday to protect its members. Stop Predatory Gambling filed on Tuesday asking for a holding that would close them.

The brief does not hide this. It says the point plainly: if §3702(2) is valid, "then it would prohibit Kalshi's sports-event contracts as sports-wagering schemes to the extent they are 'pursuant to the law or compact of a governmental entity.'" The theory of the case is that everything operating under a state licence is reachable. Kalshi is simply the defendant in the room.

There is a detail here that reads like someone's idea of a joke. SPG's brief notes, accurately, that its own amicus in Murphy was cited favourably by the majority at 584 U.S. 453, 460 n.16. The organisation the Court credited in 2018 is back to ask the Court to take part of 2018 back.

The strongest version of "so what"

The obvious answer is that this does not matter, and it deserves a real hearing rather than a dismissal.

Amici do not set the Question Presented. The Court grants on the petition's question, and New Jersey's question is about the Commodity Exchange Act, not PASPA. Restyling a cert petition at the invitation of a non-party is close to unheard-of. The three organisations here are advocacy groups, not states; their counsel is a sole practitioner, not a Supreme Court specialist shop. A brief asking nine Justices to revisit a seven-year-old precedent nobody briefed is the kind of filing that gets read and shelved. Kalshi's reply, due November 9, may not bother to mention it.

Most of that is right. We think the probability the Court adds this question is very low, and we are not predicting otherwise.

What we do not accept is that the argument is frivolous, because the doctrine has actually moved. Justice Thomas wrote separately in Murphy that the Court's severability precedents "appear to be in tension with traditional limits on judicial authority" and that severability "often requires courts to weigh in on statutory provisions that no party has standing to challenge, bringing courts dangerously close to issuing advisory opinions." 584 U.S. at 487–88, 490. Since then the Court has drifted his way. The Barr v. AAPC plurality rejected the exact "we do not think that Congress would want" formulation Murphy used, calling it "an analytical dead end" because courts "are not well equipped to imaginatively reconstruct a prior Congress's hypothetical intent." 591 U.S. 610, 625 (2020). Seila Law asked for "a scalpel rather than a bulldozer." 591 U.S. 197, 237. Arthrex invoked the "normal rule that partial, rather than facial, invalidation is the required course." 594 U.S. 1, 24.

SPG also has the receipts from the 2017 argument itself. Paul Clement, for the NCAA, told the Court the parties "haven't had to brief" §3702(2)'s enforceability "because this really hasn't been a 3702 case." Deputy Solicitor General Jeffrey Wall said invalidating it was "just not the way statutory interpretation and severability normally work."

So: a weak procedural posture attached to a legal argument that several sitting Justices have, in substance, already accepted. That is not nothing. It is a live option sitting in a drawer, and the drawer is now in the Supreme Court's hands because thirty-nine attorneys general pulled it open.

What the states actually filed

The Ohio brief — D. Andrew Wilson as attorney general, Solicitor General Mathura J. Sridharan as counsel of record — is a much better document than the trade coverage suggests, and its best section has nothing to do with gambling policy.

It is the one headed "national turf war." The circuits are not merely split on the outcome; they are split on every available mode of analysis. The Third Circuit held sports bets are swaps and the Commodity Exchange Act preempts. The Ninth held the exclusive-jurisdiction clause expressly preempts but sports bets are not swaps. The Sixth held sports bets are not swaps and nothing preempts anything. Three courts, three incompatible routes, two of them arriving at the same destination by roads that contradict each other. Below them, by the petition's count, courts have issued more than twenty decisions and divided 18–4 against preemption.

Then the part that should be the headline and has not been. The United States and the CFTC are suing the states. The first three complaints landed on April 2, against Arizona, Connecticut and Illinois, with Chairman Michael S. Selig promising to "defend market participants against overzealous state regulators." By the time Ohio wrote this brief the list ran to nine: Arizona, Connecticut, Illinois, Kentucky, Minnesota, New Mexico, New York, Rhode Island and Wisconsin. Eight appear in the brief's table of authorities under the caption United States v. — followed by the name of a state.

On August 11 the Commission went further. New York's attorney general had sued Kalshi in state court on July 31; the CFTC responded by ordering Kalshi to keep operating as a designated contract market notwithstanding the litigation, and its chairman complained publicly about New York's "iron curtain of state gaming laws," adding that states "have no business regulating these interstate financial markets." A federal agency instructed a company to continue conduct a state attorney general had just sued to stop.

Forty-four states filed comments against the CFTC's proposed rule in July. Three cert petitions are now pending: this one, Crypto.com Derivatives v. Nevada (No. 26-344) and Robinhood Derivatives v. Dreitzer (No. 26-338).

The ten who stayed out, and the one worth watching

Eleven states did not sign. New Jersey is the petitioner, so that leaves ten: Alaska, Florida, Georgia, Indiana, Kentucky, Montana, North Dakota, Tennessee, Texas and Washington.

The tempting read is that these are the states sympathetic to prediction markets. The tempting read is wrong, and the brief these states declined to sign proves it. Washington has already banned Kalshi's sports contracts and won in the Western District of Washington in May. Kentucky is prosecuting its own case against a prediction market in Kentucky v. QCX and is simultaneously a defendant in United States v. Kentucky. You do not get to call that alignment with Kalshi. Multistate amicus participation is a staffing and politics decision as much as a policy one, and a solicitor general's office with two open seats skips briefs.

Texas is the one that does not resolve that easily, because the abstention is a pattern rather than an instance. Texas declined to join the 34-state filing in June 2025. It declined the 38-state brief in the Maryland case. It declined this one. Over the same stretch, money moved: Kalshi gave $5,000 to Attorney General Ken Paxton's Lone Star Liberty PAC in May 2025 and chief executive Tarek Mansour gave $7,000 to Paxton's Senate campaign in June 2025, four days before that 34-state filing Texas sat out. Mansour gave $50,000 to Governor Greg Abbott in mid-September. Late in September, Kalshi's founders put $200,000 into a new Texas-focused PAC — roughly a week after Senator Bryan Hughes convened a hearing in the Senate Committee on State Affairs on whether prediction markets are illegal sports betting in a state where sports betting is illegal.

We cannot show that any of this money bought any of these decisions, and we are not saying it did. Texas has independent reasons to dislike multistate amicus work, and a state that bans sports betting outright has a genuinely different interest from Ohio, which licenses it. What we can say is that the pattern is consistent, the amounts are not small, and the public record contains no explanation from the attorney general's office, which declined to comment.

Where we land

We have argued here before that criminalising a federally registered exchange is the wrong tool, and we still think so. The right answer to Kalshi is a CFTC that finishes its public-interest determination, not an Arizona grand jury.

But the states have the better of the jurisdictional argument, and the AGA brief supplies the number that makes it hard to argue otherwise: in 2025, sports betting accounted for over 90% of Kalshi's trades and 95% of its revenue. That is not a derivatives exchange with a sports vertical. The brief reproduces Kalshi's own advertising to the same effect — "Hey New York… Bet on the NFL, Legal in 50 states."

The thing to watch is not whether thirty-nine states can get four votes. It is what the coalition does to itself if they succeed. The attorneys general want their licensing regimes back. The AGA and the Atlantic City casinos want a competitor held to their rules. Stop Predatory Gambling wants the rules themselves declared a federal crime. Those three positions can share a docket. They cannot share a remedy.

What would change our mind: if Kalshi's November 9 brief in opposition engages the §2(e) consequence argument — that on its own reading every off-exchange bet in America becomes an unlawful off-exchange swap — and has a real answer, the states' strongest card is gone. So far nobody on Kalshi's side has produced one.