A prediction-market fight nears the Supreme Court

Flip Pidot, chief strategy officer at PredictIt, says the fight over who polices prediction markets is on track to reach the Supreme Court by the end of next term. Speaking this week at a prediction-markets event in New York, Pidot described the standoff between the Commodity Futures Trading Commission and a supermajority of state attorneys general as the kind of intergovernmental conflict that draws the justices in. If the Court takes a case, he said, a ruling would likely come by June.

The conflict has been building in the appeals courts, and the next few months could determine whether the justices intervene. In April, the Third Circuit sided with Kalshi in its dispute with New Jersey, ruling that federal commodities law preempted the state's gambling law and affirming a lower-court decision that let Kalshi keep operating there. Other cases are heading the other way. A Ninth Circuit panel heard arguments this year in Nevada's attempt to enforce its gambling law against event-contract platforms, and the judges appeared skeptical of the three prediction-market companies' arguments. Kalshi has also appealed to the Second Circuit after adverse rulings by federal judges in New York and Connecticut in the past two months.

If a single appellate court rules against Kalshi, the resulting circuit split would give the Supreme Court a reason to step in. Pidot expects that to happen as soon as November. Stephen Piepgrass, a partner at Troutman Pepper Locke who works on prediction-market cases, said other factors make Supreme Court review nearly inevitable, including the constitutional questions the dispute raises. In 2018, the Court ruled that the federal government could not stop states from legalizing sports betting, a Tenth Amendment decision that now hangs over the current fight.

The legal reckoning arrives after two years of explosive growth for U.S. prediction markets. The CFTC, under the Trump administration, has taken a more accommodating position, arguing that event contracts traded on its registered exchanges fall under its exclusive authority. States call sports-linked contracts unlicensed wagering. The states that depend on gaming revenue have the most to lose: an unregulated rival to licensed sportsbooks threatens a major tax base.

What happens next depends on the Second Circuit. Kalshi's appeals there follow adverse district court rulings; a loss would create the split Pidot predicts, and a Ninth Circuit defeat would do the same. Either way, the CFTC's claim of exclusive jurisdiction — the position that has defined the current regulatory approach to event contracts — would get its first serious Supreme Court test since the 2018 sports betting decision.

For private wealth and custody desks watching this space, the case is a reminder that the digital-asset rulebook is still being written by courts as much as by agencies. A Supreme Court ruling would settle the boundary between federal commodities oversight and state gambling law, a boundary that matters to any platform listing event contracts and any institution considering whether to touch them.