A surge of six amicus curiae briefs were filed in the Third Circuit Court in support of New Jersey’s legal battle against Kalshi, a federally regulated prediction market operator currently offering sports event contracts nationwide.
The “friend of the court” briefs represent a broad coalition of stakeholders, including state governments, tribal organizations, industry groups, and anti-gambling advocates, all voicing strong opposition to Kalshi’s business model and its implications for state and tribal regulatory authority.
“You have almost every voice in the room being heard in this brief,” sports betting and gaming lawyer Daniel Wallach said on the latest Prediction News Update podcast.
“When the Third Circuit considers the merits of whether the Commodity Exchange Act has preempted state sports gambling laws, it’s going to have a much fuller record not just factually, but also a number of corollary arguments that didn’t quite get presented in the New Jersey and the Nevada oral arguments.”
While the court has yet to hear from “friends” of Kalshi, the time for that will be coming soon.
Legal backdrop of Kalshi vs. New Jersey
A number of states initiated action against Kalshi (and others) for offering what they alleged to be illegal sports betting back in April. Kalshi responded to those cease-and-desist letters by suing Nevada, New Jersey, and Maryland.
The New Jersey District Court followed in the path of Nevada’s judge in granting Kalshi a preliminary injunction that allowed the prediction market exchange to continue to operate in the Garden State as the court case plays out. But New Jersey appealed the decision and last month, the Court of Appeals granted a request to expedite the appeal, which will be heard in the Third Circuit Court.
The appeal process and the state’s opening brief raised an opportunity for amicus briefs to be filed on behalf of the state (New Jersey Attorney General Matthew Platkin and Division of Gaming Enforcement Director Mary Jo Flaherty). Thanks to the same court granting a 14-day extension, Kalshi has until July 24 to file its response brief, which will open up a seven-day period of opportunity for amicus briefs on Kalshi’s behalf.
When will we hear from the CFTC?
Kalshi’s request for an extension was in part based on “several other litigation deadlines,” but Wallach suspects there is more to the timing.
“The reason [Kalshi requested an extension] I’m convinced is to give Brian Quintenz an opportunity to be confirmed as CFTC chairman and then to empower the agency to retain outside counsel to file an amicus curiae brief. If they had to file by the original date of July 10th, I don’t know if his confirmation vote has occurred yet, but until he’s confirmed as CFTC chairman, maybe there isn’t a willingness of the agency to take that position in court. Once he’s confirmed, [it’s a] different story. So I think the extra time builds some runway for Brian Quintenz to hire outside counsel and you’ll hear the CFTC weighing in with a counter to all these arguments that are raised by the amici curiae litigants and by the state of New Jersey.”
Quintenz, Trump’s pick for CFTC Chairman, is a former Kalshi board member and outspoken in his belief that all events, including sports-related ones, are commodities.
“If CFTC doesn’t weigh in here, that does not bode very well for Kalshi’s chances…They absolutely have to be heard and the court may in fact order it.”
Overview of amicus briefs in support of New Jersey
The six briefs were submitted by the following groups:
- Coalition of 34 State Attorneys General, plus Washington D.C. and the Northern Mariana Islands
- Coalition of Tribal Organizations: 60 individual tribes and nine tribal associations, including the Indian Gaming Association
- American Gaming Association (AGA)
- Casino Association of New Jersey (CANJ)
- Coalition of Anti-Gambling Groups: Stop Predatory Gambling, Texans Against Gambling, Association of American Physicians and Surgeons
- New Finance Institute (filed just after the deadline and seeking inclusion)
Let’s take a look at key arguments and each brief’s significance.
State Attorneys General Coalition
Argument: Emphasizes the sovereign right of states to regulate gambling within their borders, warning that Kalshi’s federally approved operations threaten this autonomy and could undermine the precedent set by the 2018 repeal of PASPA (Murphy v. NCAA). They argue that the CEA never intended for the CFTC to preempt state regulation when it comes to sports betting. The AG coalition also focuses on the consumer protection angle and the unique position of states to craft and enforce localized gambling protections in a way that a federal agency cannot.
Key Quote: “States rightfully have the ability to protect their citizens from the negative consequences of online gambling, no matter how it’s packaged.”
Significance: The wide range of states represented in this coalition bridges political lines and is a strong show of bipartisan alliance on the issue.
Tribal organizations
Argument: Asserts that Kalshi’s sports contracts infringe on tribal sovereignty and violate the exclusivity guaranteed to tribes under the Indian Gaming Regulatory Act (IGRA). The brief, representing 60 tribes and nine tribal organizations, argues that Kalshi’s contracts constitute Class III gaming and are not preempted by the Commodity Exchange Act (CEA).
Key quote: According to Wallach, the tribes’ brief “knocked the lights out on two issues: the IGRA argument and the CFTC’s categorical prohibition against event contracts involving gaming. The tribal articulation of that argument carries with it a certain gravitas that would be lacking if the states were doing that.”
Significance: This is the first major entry of tribal gaming interests into the federal debate over prediction markets, adding substantial legal and political weight to the opposition.
“Those [IGRA] arguments were not meaningfully advanced by states that are not tribal centric when it comes to the gaming environment; the tribes have brought a lot of weight to this as well,” said Wallach.
American Gaming Association (AGA)
Argument: Warns of the disruptive effects of unlicensed sports wagers on the regulated gaming industry and argues that the CFTC’s jurisdiction should not override state regulatory frameworks.
Quote: “When Congress speaks to the issue of sports gambling, it speaks loudly and it carries a big stick,” said Wallach. “It doesn’t do anything silently or by implication; hence you have PASPA, you have expressed declarations of congressional policy. When it comes to sports gambling or gaming in general, there’s absolutely nothing done by implication through silence, through acquiescence.”
Significance: The AGA’s brief reinforces the position that federal law should not be interpreted to silently preempt state gaming regulation.
Casino Association of New Jersey (CANJ)
Argument: Argues that Kalshi is operating as an unlicensed online casino, circumventing state law and threatening the integrity of New Jersey’s regulated market.
Quote: “Kalshi is an online casino with a guerrilla marketing strategy, not the next Chicago Mercantile Exchange (CME) competitor… If Kalshi wins this appeal, it is positioned to leverage its considerable influence to sic the federal government on casinos that comply with state law.”
Significance: The brief is particularly critical of Kalshi’s regulatory strategy and the involvement of former CFTC commissioner Brian Quintenz, highlighting concerns about federal overreach and competitive threats to state-licensed casinos.
Anti-Gambling Coalition
Argument: Focuses on public health risks, arguing that Kalshi’s model would expand gambling access without adequate safeguards, increasing risks of addiction and related harms.
Quote: “Stop Predatory Gambling is saying…there’s a greater public interest in play here which is the expansion of gambling which could destroy lives—the rate of suicide among gamblers being 15 times higher than the general population, increased bankruptcies, decreased savings,” said Wallach. “They highlight the harms, at least from their lens, associated with gambling addiction as something that undergirds the public interest analysis on a preliminary injunction.”
Significance: This brief stands out for addressing the public interest factors required for a preliminary injunction, emphasizing the broader societal consequences of unregulated gambling expansion. Also, according to Wallach:
“[The Stop Predatory Gambling brief] might be one of the most important briefs that have been filed of all of them because they highlight one of the key factors on a motion for preliminary injunction none of the other parties or amici focused on.”
New Finance Institute
Argument: This group believes that the CFTC, not states, should have complete control over sports betting, and claims the CFTC is in violation of the Administrative Procedure Act (APA) for failing to rule on or address the legal uncertainty around self-certified sports event contracts.
Quote: The NFI says the CFTC’s inaction on the question of sports event contract regulation “creates a regulatory vacuum that reshapes the legal landscape entirely.”
Significance: This brief was submitted just after the deadline and is seeking acceptance by the court. NFI is a financial literacy company with a stated mission of “Discovering financial truths and bringing financial empowerment to the masses.” The group is lobbying for overturning of the preliminary injunction and legal clarity on the issue.
Kalshi vs. the world?
The outcome of this case, and other pivotal ones like Kalshi vs. Maryland, could set a major precedent for the regulation of prediction markets and the balance of federal and state authority over gambling in the United States.
But not before the CFTC and potentially other amicus curiae briefs come in on behalf of Kalshi. For the moment, as Wallach put it, “It’s as if it’s Kalshi against the world.”
