New Jersey was granted its expedited appeal from the Court of Appeals for the Third Circuit on Monday. The Third Circuit will now hear New Jersey regulators’ appeal to overturn Kalshi’s preliminary injunction on a shorter schedule than previously planned.
New Jersey argued that there were several pressing concerns that should be addressed before football season, hence the request for a quicker timeline:
"To name just a few, the Sports Wagering Act’s comprehensive licensing and regulatory regime protects minors from gambling; ensures that sports-wagering operators are financially stable enough to cover outstanding sports wagers; facilitates detection of suspicious or illegal betting activity; and employs additional security measures relating to anti-money laundering, cyber security, identity authentication, responsible gaming practices, and problem gambling protections."
Sports betting attorney Daniel Wallach shared on LinkedIn he believes that the expedited timeline could shave one to two months off the case’s potential timeline. That would date the case’s resolution around the end of 2025, plenty of time to secure legal clarity before the next Super Bowl and March Madness.
New Jersey’s return to the judicial spotlight
New Jersey was the original state at the center of sports betting’s initial expansion. In 2018, the Supreme Court struck down PASPA, which allowed states to choose to regulate sports betting if they chose. That Supreme Court case stemmed from New Jersey’s 2014 attempt to regulate sports betting.
So, it’s unsurprising that New Jersey gambling regulators are at the center of litigation over sports contracts. After fighting to legalize sports betting since 2012, the year of an unsuccessful court challenge, New Jersey regulators are keen to protect the industry that is less than a decade old.
NJ sports betting regulators view the rapid growth of sports event contracts as an encroachment on their turf. Indeed, the prediction market industry has grown aggressively, especially among commercial platforms like Kalshi, which is incentivized to offer markets on as many subjects as possible.
As a peer-to-peer Designated Contract Market (DCM), Kalshi profits from trading fees on future event markets covering a wide range of interests, both popular and niche. Sports markets greatly expand Kalshi’s offerings in terms of sheer volume and double as a valuable customer acquisition tool thanks to wide interest in speculating on sporting event outcomes.
Robinhood expanding sports offerings alongside Kalshi
Despite ongoing legal challenges, Kalshi has still managed to expand its sports contracts via retail trading platforms. Kalshi’s brokerage partner, Robinhood, just expanded its sports markets, listing contracts on the NBA and NHL playoffs on Monday.
Event contracts allow traders to profit if specific events occur, an improvement over guessing which group of stocks will rise or fall in response to an event. Retail investors, ordinary people who can trade these instruments on their phones, disrupt the financial industry’s traditional approach to event contracts.
Similar product by a different name?
Since event contracts on a game’s outcome are functionally the same as moneyline bets, the financial industry has managed to create what many consider a gambling product, under financial regulations. However, it’s fairly common in the financial industry to allow for a range of trading instruments, even with different guidelines. For example, traders can elect to trade gold as an ETF under SEC rules or as a commodity (via futures and option contracts) under CFTC rules.
The idea of offering the same product under different regulations is much more foreign to the regulated gambling industry, as evidenced by the overwhelming negative industry response to Kalshi’s sports contracts. Unless or until Kalshi gets a definitive positive ruling in the matter, expect states like New Jersey to continue to fight for exclusivity over anything resembling sports gambling.
