The National Football League asked the United States Supreme Court on Thursday to reject a legal theory central to Kalshi’s sports prediction market business, arguing that contracts predicting game outcomes are gambling products rather than swaps subject to exclusive federal derivatives regulation.
League Disputes Federal Preemption in Flaherty v. KalshiEX
The core dispute centers on whether federal oversight by the Commodity Futures Trading Commission supersedes state sports betting regulations when contracts trade on a registered derivatives exchange. Kalshi’s jurisdictional defense relies heavily on the Commodity Exchange Act, maintaining that sports event contracts on its CFTC-regulated designated contract market qualify as swaps and therefore fall under exclusive federal oversight.
The NFL directly attacked that premise in its filing for the case styled as Flaherty v. KalshiEX. The NFL has supported New Jersey’s supervisory authorities in asking the Supreme Court to review the Third Circuit’s ruling that prevented the state from applying its gambling laws to Kalshi’s exchange.
Circuit Splits and State Enforcement Across the Country
The legal clash has created starkly different operating conditions nationwide. The Third Circuit ruled in favor of Kalshi’s federal preemption theory in New Jersey, but other courts have increasingly allowed state and tribal gambling restrictions to stand.
The Ninth Circuit rejected Kalshi’s attempt to dodge Nevada gambling regulations in August and subsequently blocked its sports markets across two California tribal territories. The Sixth Circuit followed suit in September, concluding that Kalshi’s sports event contracts do not meet the legal definition of a swap. The Third and Sixth or Ninth Circuits decided the opposite way, creating a conflict that only the Supreme Court can resolve.
The NFL urged the Supreme Court to follow the Sixth and Ninth Circuits, which rejected Kalshi’s classification. New Jersey filed its petition with the high court in September after the Third Circuit sided with the exchange, and Kalshi’s response to that petition is currently scheduled for November 9.
Commercial Stakes and Integrity Concerns Raised by the NFL
The financial stakes for both sides continue to scale rapidly. According to the NFL’s brief, league-related contracts generated $1.8 billion out of $3.3 billion in total trading volume recorded across prediction markets during the first Sunday of the current NFL season, with the league wanting a decision by the 2027 season.
Beyond jurisdiction, the league argues that the current CFTC regulatory framework does not provide consumer protections equivalent to those required of state-regulated sports betting operators. The filing pointed to safeguards the league wants applied to markets vulnerable to manipulation by individual players, coaches, or officials, alongside stricter controls on trading based on non-public information and an age minimum set at 21. Prediction markets currently serve customers starting at age 18. The NFL's brief also noted that the CFTC has a national staff of 543 employees, which the league considers insufficient to supervise these markets, adding that without league-specific banned bettor lists, operators' insider trading policies remain paper tigers.
Contrast in Approach Among Other Professional Sports Leagues
The NFL’s adversarial stance stands in contrast to the more collaborative approach taken by other major sports organizations. The National Hockey League named both Kalshi and Polymarket official prediction market partners in 2025 and subsequently signed a game integrity data-sharing agreement with the CFTC.
Major League Baseball went further in March, naming Polymarket its exclusive prediction market exchange partner while also striking a separate information-sharing deal with the CFTC regarding integrity risks. Those agreements indicate sports leagues hold sharply differing views on whether prediction markets belong inside the federal derivatives system.
For Kalshi, the consequences of a Supreme Court defeat would stretch far beyond New Jersey, potentially forcing the exchange to comply with dozens of separate state gambling regulations if the high court strips away federal preemption.
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