Developing Thirty-Nine States, a Tribe and Two Regulator Associations Filed Against Kalshi in Five Days. The Brief That Should Worry the Exchange Is the One Arguing the Court Should Revisit Murphy

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.

Kalshi has not filed a word in the Supreme Court. Its brief in opposition is not due until November 9, after the Court granted it a seven-week extension on September 22. And yet the amicus side of Flaherty v. KalshiEX, LLC, No. 26-299, is effectively closed. Four briefs went in between October 2 and October 7: the International Association of Gaming Regulators with the North American Gaming Regulators Association, the Cabazon Band of Cahuilla Indians, a trio of nonprofits, and Ohio with thirty-eight other states and the District of Columbia.

That last one is the headline everywhere today. Pennsylvania's attorney general put out a release calling it forty attorneys general; the Supreme Court's docket lists it as "Ohio, 38 Other States, and the District of Columbia." The ten that did not sign are Alaska, Florida, Georgia, Indiana, Kentucky, Montana, North Dakota, Tennessee, Texas and Washington. Nine of those have Republican attorneys general, which tells you the alignment here is not partisan in the way these things usually are. Tennessee is the interesting absence: it won in the Sixth Circuit against Kalshi on September 25, alongside Ohio, and apparently feels no urgency about getting the question resolved further.

But the brief that matters is not the one with thirty-nine signatures. It is the three-page-idea one.

The nonprofits asked for something nobody else did

Stop Predatory Gambling, the Association of American Physicians and Surgeons and Texans Against Gambling filed jointly on October 7, and their ask is not "affirm state authority over prediction markets." It is that the Court use this case to reexamine Murphy v. NCAA — the 2018 decision that struck down PASPA and created the entire legal American sports-betting industry.

Read that again in the context of who is cheering the state briefs. The American Gaming Association's member books have spent eighteen months arguing that Kalshi is an unlicensed competitor evading the rules they follow. Every one of those arguments is a reason to take the case. None of them is a reason to want the Court looking hard at whether Murphy was correctly decided. A petition granted is a case argued, and a case argued is a set of oral-argument questions nobody controls.

This is the structural problem with the "let the Supreme Court sort it out" position that has become consensus in licensed gaming. The consensus assumes the Court will answer the narrow question — does Dodd-Frank preempt state sports-wagering law for contracts listed on a CFTC-registered exchange — and stop. Courts do that most of the time. They do not do it all of the time, and the party asking them not to stop has now filed.

What New Jersey actually asked

The Question Presented in the state's petition, filed September 2 by Solicitor General Jeremy Feigenbaum, is one sentence: whether the 2010 Dodd-Frank 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's strongest material is not rhetorical. It is statutory. Dodd-Frank's §745 added a special rule for event contracts, codified at 7 U.S.C. §7a-2(c)(5)(C), under which the CFTC may determine that contracts based on the occurrence of an event are contrary to the public interest — and the enumerated categories are terrorism, assassination, war, gaming, and activity unlawful under any federal or state law. The CFTC's own 2011 implementing rule, 17 C.F.R. §40.11(a)(1), flatly prohibits a registered entity from listing a swap that "involves, relates to, or references … gaming, or an activity that is unlawful under any State or Federal law."

New Jersey's point is that Congress put the word "gaming" into a federal statute as a thing the CFTC should screen out, and the Third Circuit read the same statute to mean Congress federalised gaming. The petition also lays out the mechanism that makes this self-executing: a registered exchange self-certifies a new contract, the CFTC has ten business days to stay the certification, and if it does nothing the contract lists. Kalshi's sports contracts went live in January 2025 through that door. Nobody voted on it.

And the scale figure, which New Jersey takes from the Ninth Circuit's Assad opinion rather than from an advocacy estimate: in 2025, 90 per cent of Kalshi's trades were tied to sports, generating 95 per cent of its revenue.

Where we come down, and why it is uncomfortable

We have argued in this column against criminalising a federally licensed exchange, and we still do. A state attorney general threatening prosecution of a CFTC-registered designated contract market for listing a contract the CFTC declined to stay is a bad use of criminal law, whatever you think of the product. Kris Mayes' Arizona case remains the clearest example.

But that position has always been narrower than Kalshi's lawyers want it to be, and the distinction matters now. "Do not prosecute" is not "the Commodity Exchange Act abolished state gaming law in 2010." The Third Circuit's reading, if the Supreme Court adopts it, hands any CFTC registrant a general licence to offer sports wagering in all fifty states — including the handful where it remains illegal for everyone else, and including on tribal land, where the Ninth Circuit held on September 16 in Blue Lake Rancheria v. Kalshi that the CEA does not displace IGRA. That holding and the Third Circuit's cannot both be right, and the Cabazon Band's brief exists because hundreds of tribal economies are built on the assumption that the Ninth Circuit's version is.

The strongest counterargument runs like this: the states are not defending federalism, they are defending a tax base. Illinois taxes sportsbook revenue on a sliding scale that tops out at 40 per cent and charges a per-wager levy on top of it. A venue that pays neither is a competitor, and the AG letterhead is doing work that a trade association's would not. There is something to this, and the money confirms the fight is transactional in both directions — OpenSecrets counted at least $3m in prediction-market lobbying and political giving in the first half of 2026, including $147,500 to the Republican Attorneys General Association and $170,000 to the Democratic one, with Kalshi now registered to lobby in 41 states.

It is still not an answer. A revenue motive does not make a preemption argument wrong, and the preemption argument is where this gets decided. Daniel Wallach put the record at G2E on Monday as 38 of 43 rulings going against prediction markets. Kalshi's counter is that it only needs the one it has — the Third Circuit — plus five votes. Wallach's other number is the honest one for both sides: the Supreme Court has reversed about 70 per cent of the cases it has taken over twenty years. Everyone pushing for a grant is betting on a court that mostly disagrees with whoever got there first.

We do not know whether the Court will take it. Three petitions are pending — Flaherty, Robinhood Derivatives v. Dreitzer (No. 26-338) and North American Derivatives Exchange v. Nevada (No. 26-344) — and a split this clean, this fast, with this many states behind it, is close to the textbook case for certiorari. What we would watch for instead is the opposite tell: if Kalshi's November 9 brief spends real space arguing there is no split worth resolving, that is a company that has read the same amicus docket we have and decided it would rather keep the Third Circuit than risk the whole question.