This week has been eventful for prediction markets, marked by significant legal actions and regulatory scrutiny. New Jersey has escalated its legal battle regarding Kalshi to the U.S. Supreme Court, while the exchange has made adjustments to its offerings in response to pressure from the CFTC and NFL.
New Jersey is seeking a Supreme Court ruling on whether state gambling laws can govern sports event contracts on CFTC-regulated exchanges. This request follows conflicting decisions from appellate courts, with the Third Circuit affirming that Kalshi's sports contracts are swaps, thus overriding New Jersey's regulations, while the Ninth Circuit ruled otherwise in a recent Nevada case.
In Michigan, a judge has issued a preliminary injunction that continues to prohibit Kalshi from offering its sports event contracts in the state during its ongoing legal proceedings. This decision extends an earlier temporary restraining order and mandates that Kalshi utilize a licensed third-party geolocation service to block access for Michigan users, with potential penalties for non-compliance.
The Ninth Circuit's ruling is influencing other states involved in prediction market litigation, as Ohio, Iowa, and Utah have referenced it in their legal arguments, following similar actions from Rhode Island and Illinois.
Meanwhile, Novig's federal lawsuit in New Mexico has been postponed until 2027, allowing it to operate in the state for the next year. Novig has also paused its case against Massachusetts officials until the state's Supreme Judicial Court resolves Kalshi's appeal regarding a preliminary injunction against its sports event contracts.
In response to regulatory demands, Kalshi has removed American odds and markets related to athlete injuries from its platform. The CFTC advised against sportsbook-style odds, prompting Kalshi to display prices in alternative formats. Additionally, the exchange ceased offering injury-related contracts after the CFTC's request, which included markets on player participation in upcoming games.
As Kalshi makes these adjustments, the NFL has reiterated its call for prediction markets to eliminate certain objectionable contracts in anticipation of the 2026 season.