Key Takeaways
- New Jersey’s gaming regulators petitioned the US Supreme Court on 2 September 2026 in Flaherty v. KalshiEX, LLC, No. 26-299, asking whether federal commodities law stops a state enforcing its gambling laws against sports event contracts listed on a CFTC-registered exchange. Kalshi’s reply is not due until 9 November 2026. [1]
- Eleven supporting briefs were filed between 22 September and 9 October 2026, among them a joint filing by the International Association of Gaming Regulators and the North American Gaming Regulators Association, a brief from Ohio and 38 other states with the District of Columbia, and separate briefs from the National Football League, 145 tribes and tribal organisations, and the American Gaming Association. [1] [2]
- Three federal appeal courts have given three answers. The Third Circuit sided with Kalshi on 6 April 2026, the Ninth Circuit held on 16 September 2026 that the contracts are class III gaming when opened from tribal land, and the Sixth Circuit held on 25 September 2026 that they are not swaps at all. [1] [3] [4]
- ESMA confirmed on 3 July 2026 that an event contract qualifying as a financial instrument is a binary derivative, so national measures prohibit selling it to retail clients anywhere in the European Union. [5]
What is in front of the Supreme Court, and when will it be answered?
The question is whether federal commodities law stops a state regulating a sports wager that is listed on a CFTC-registered exchange, and the earliest a ruling could come is the end of the Court’s term in June 2027.
Mary Jo Flaherty, interim director of the New Jersey Division of Gaming Enforcement, filed on 2 September 2026 against the Third Circuit’s judgment of 6 April 2026 in No. 25-1922. Kalshi asked for an extension and was given one, so its brief in opposition is not due until 9 November, and the Court will not consider taking the case before the end of this year. [1]
Operators are planning the whole of 2027 against a question nobody can answer yet.
Why does the disagreement between the circuits matter more than the final ruling?
Because the disagreement is the condition operators are working in, and it is widening. The regulators’ own brief says the split is “established, and it is growing”, with further appeals pending in the Fourth and Second Circuits. [2]
The same contract on the same exchange is lawful in one part of the United States and open to state enforcement in another. Anyone treating this as purely a financial law question should read the Ninth Circuit in Blue Lake Rancheria v. Kalshi, which asked what the activity does rather than what the operator calls it and held the contracts to be class III gaming under the Indian Gaming Regulatory Act when a user opens one from tribal territory. The court added that it would have reversed even if the contracts were swaps, because the Commodity Exchange Act and IGRA “simply address two different questions”. [3]
How do the main markets classify prediction markets?
No two of them have reached the same position, and four European regulators have already shut Polymarket out.
| Market | Who decides | Position as at 12 October 2026 |
| United States | CFTC and the federal courts | Contested. Third Circuit for Kalshi, Sixth and Ninth against, petition pending. Two CFTC rules on event contracts went to White House review on 28 September 2026. [1] [9] |
| European Union | ESMA and national competent authorities | A qualifying event contract is a binary derivative, so national measures prohibit its sale to retail clients. [5] |
| Great Britain | Gambling Commission | Treated as a betting exchange, requiring an operating licence. No formal determination published. [10] |
| Gibraltar | Licensing Authority and Gambling Commissioner | A separate prediction market authorisation under LN.2026/176, in force 13 July 2026, the first of its kind. [7] |
| Italy, France, Netherlands and Lithuania | National gambling regulators | Polymarket blocked or removed in each. [8] |
An exchange that wins its argument in the United States, then gets treated as a financial venue in the European Union, finds its contracts are binary derivatives it cannot sell to retail clients at all. [5] So winning the classification fight is worth something quite different depending on where it is won, and a group licensed across several markets cannot run one answer through all of them.
Where does the risk sit for a licensed operator?
With the partnership, because that is the part a gaming regulator can already act on. Nevada’s Gaming Control Board wrote to licensees on 15 October 2025 under the heading “Sports Event Contracts Are Wagers”, treating the contracts as wagering wherever they are listed and saying that offering them, or partnering with a firm that does, will put the entity’s suitability into question. [6]
The regulators’ brief argues from the other direction that the consumer protections at issue all “depend on the regulator’s authority over that entity”, citing Ohio Casino Control Commission findings that contracts were offered to customers aged 18 to 20, that the voluntary exclusion programme was narrower than Ohio law requires, and that contracts were listed on events the state had never approved. [2]
Which of our licences does this actually touch?
- In which of our licensed markets has the regulator published a position on sports event contracts, and when did that position last change?
- If we signed with an exchange next month, which of our licences would be reviewed first, and who at that regulator takes the decision?
- Has anyone written down what the Nevada notice means for this group, given that it reaches partnering as well as offering?
- Do our platform, supplier or affiliate contracts already let a counterparty put our customers into an event contract product without our sign-off?
What is the commercial case actually worth?
- How much of the reported volume is face value rather than money staked? The combined Kalshi and Polymarket figure of $53bn for July 2026, against $26bn in May, counts every contract at its $1 payout whatever was paid for it. [8]
- Which of our customer segments has genuinely moved, and what evidence do we have for that beyond a fall in sportsbook turnover?
- If a competitor in one of our markets lists event contracts next quarter, what is our answer, and does it change market by market?
- What does waiting for the Court cost us, measured against the cost of a suitability review in the market that earns us most?
What happens to player protection while the question is open?
- If a customer excluded through our market’s register can trade event contracts somewhere else, whose job is it to tell them?
- Does our integrity monitoring reach event contract activity on the fixtures we take bets on, and if it does not, who sees that activity?
- Would our age verification, exclusion and event approval controls survive the comparison Ohio drew, if a regulator ran it against us next week?
What goes into the 2027 plan?
- Which version of 2027 does the budget assume, and has anyone costed the other one?
- If the CFTC’s two pending event contract rules take effect before the Court rules, which of our planning assumptions change?
- Who owns this file inside the business, and on what date does it come back to the board?
What should the board do before the next meeting?
- Build a one-page map with a row for each licence held, naming the regulator, its current position, the date that position was given, and who would review the licence if a partnership were announced.
- Read the platform, supplier and affiliate contracts for any clause that lets a counterparty introduce an event contract product, and list every one that does.
- Answer the competitive response question licence by licence rather than once for the group, because one group-wide answer will be wrong in at least one market.
- Set a review date no later than the first week of December 2026, when the Court’s handling of the petition should be clearer.
Sources
1. Supreme Court of the United States, docket No. 26-299, Flaherty v. KalshiEX, LLC. Petition for a writ of certiorari filed 2 September 2026 and docketed 8 September 2026 against the Third Circuit’s judgment of 6 April 2026 in No. 25-1922; response extended on 22 September 2026 to 9 November 2026; amicus filings dated 22 September to 9 October 2026. https://www.supremecourt.gov/search.aspx?filename=/docket/docketfiles/html/public/26-299.html
2. Brief of Amici Curiae the International Association of Gaming Regulators and the North American Gaming Regulators Association in Support of Petitioners, No. 26-299, filed 2 October 2026, at pages 4, 16, 18 and 22 to 23. https://www.supremecourt.gov/DocketPDF/26/26-299/428370/20261002172612208_397111_Brief%20of%20Amici.pdf
3. Blue Lake Rancheria v. Kalshi, Inc., No. 25-7504 (9th Cir. 16 September 2026), opinion of Judge McKeown, argued 10 July 2026. https://cdn.ca9.uscourts.gov/datastore/opinions/2026/09/16/25-7504.pdf
4. KalshiEX LLC v. Schuler (6th Cir. 25 September 2026), opinion of Circuit Judge Julia Smith Gibbons, holding that the sports event contracts are not swaps and that the Commodity Exchange Act would not preempt Ohio and Tennessee gambling law even if they were.
5. European Securities and Markets Authority, Public Statement on the application of the national product intervention measures on binary options to event contracts, 3 July 2026.
6. Nevada Gaming Control Board, Notice to Licensees, “Sports Event Contracts Are Wagers”, 15 October 2025, signed by Chair Mike Dreitzer.
7. Gibraltar Prediction Market Regulations 2026 (LN.2026/176), in force 13 July 2026, made under sections 34 and 159 of the Gambling Act 2025, creating a prediction market authorisation granted by the Gibraltar Licensing Authority and supervised by the Gibraltar Gambling Commissioner.
8. Pew Research Center analysis of data from The Block, published 23 September 2026, on combined Kalshi and Polymarket contract volume of about $53bn in July 2026 against about $26bn in May 2026, as reported by Forbes on 6 October 2026. The figures value each contract at its $1 payout rather than the price paid, so they measure face value and not money staked. The same reporting records Polymarket blocks and removals in Italy, France, the Netherlands and Lithuania during 2026.
9. Forbes, 6 October 2026, reporting that two CFTC rules on event contracts, one classifying them as swaps and one interim final rule excluding casino-style gambling products, were sent to White House review on 28 September 2026.
10. Gambling Commission statements of February 2026 that a prediction market offered in Great Britain would be treated as a betting exchange and would require an operating licence, and that a prediction market operator could not classify its products as non-gambling. No formal determination has been published.