NFL Backs New Jersey in Supreme Court Prediction Markets Fight
The National Football League has entered one of the most consequential regulatory disputes in US financial markets, filing an amicus brief with the Supreme Court in support of New Jersey officials challenging the federal authority of prediction market platforms. The case centres on whether Kalshi and similar platforms fall under state gambling regulators or the federal Commodity Futures Trading Commission, and its outcome could reshape the compliance, licensing, and accounting landscape for any firm that touches event-contract trading. For teams using crypto accounting software to track positions on these platforms, a ruling that shifts jurisdiction could trigger an entirely new reporting regime overnight.
What the NFL Filing Actually Says
The league filed its brief on the same day that 39 US states and the District of Columbia submitted their own supporting brief, making this one of the broadest multi-party challenges to CFTC jurisdiction in recent memory. The NFL's central arguments break down into three areas.
Game integrity and manipulable contracts
The NFL pointed to data from the opening Sunday of the current season showing that NFL-related trades accounted for roughly $1.8 billion of the $3.3 billion in total prediction-market volume that day, over half of all activity on those platforms. The league argued that many sporting-event contracts are inherently susceptible to manipulation: a player can alter personal performance, a coach can adjust a lineup, and an official can influence the outcome of specific plays, all of which can be known in advance by the parties closest to the game.
Labelling sports bets as "swaps"
A second issue the NFL raised is whether event contracts linked to sporting outcomes can legitimately be classified as "swaps" under the Commodity Exchange Act, which is the classification that places them under CFTC oversight rather than state gaming law. New Jersey has argued that this label is a legal fiction that federalises what are, in substance, sports bets. The NFL endorsed that view, saying the question has "major question" doctrine implications that only the Supreme Court can settle.
Absent safeguards at the federal level
The league also criticised what it described as a lack of "sensible safeguards" from the CFTC for event contracts. That gap, it argued, leaves consumers without the protections that state gaming regulators have historically provided, including licensing requirements, integrity monitoring, and anti-money-laundering controls tailored specifically to sports wagering.
The Broader State Coalition and the "National Turf War"
The parallel brief from 39 states and the District of Columbia framed the dispute in stark terms, calling the conflict between state authorities and the CFTC a "national turf war" that is already producing unpredictable compliance outcomes. That brief warned that waiting too long to resolve the circuit split would allow the federal-state power struggle to escalate, creating legal uncertainty for every operator and every counterparty in the prediction-market space.
Why the circuit split matters
When different federal circuit courts reach contradictory conclusions about the same regulatory question, firms operating nationally face an impossible situation: conduct that is lawful in one jurisdiction may be unlawful in another, and the applicable reporting rules differ accordingly. The states' brief called on the Supreme Court to step in, resolve the split, and clarify the boundaries of CFTC authority before the volume of cases at lower-court level makes the patchwork unmanageable.
As of the date of publication, the Supreme Court had not announced whether it would grant certiorari. Kalshi has until 9 November to file its response, having received an extension to address the jurisdiction, manipulability, and consumer-protection arguments raised by New Jersey.
Regulatory Jurisdiction: What Hangs in the Balance
The stakes of this case extend well beyond sports betting. Prediction markets as a category, including those offering contracts on economic data releases, election outcomes, and other events, have grown rapidly on the back of CFTC-regulated or CFTC-tolerated frameworks. A Supreme Court ruling that strips the CFTC of jurisdiction over sporting-event contracts would not automatically affect other contract categories, but it would invite immediate challenges to the CFTC's authority across the prediction-market space.
CFTC oversight versus state gaming licences
At present, Kalshi operates under a CFTC-registered designated contract market licence. State gaming regulators argue that this federal licence does not pre-empt state law for contracts that are, in substance, bets on sporting outcomes. If the Supreme Court agrees, operators would need to comply with the gaming regulations of each state in which their customers reside, a compliance burden that Kalshi's spokesperson characterised as being regulated "by 50 different regulators." The tension between a single federal framework and a patchwork of state regimes is precisely the kind of structural uncertainty that makes consistent accounting and AML compliance difficult to maintain.
AML and KYC Implications for Accounting Firms and CFOs
Prediction market platforms currently operating under CFTC oversight carry the AML obligations that apply to designated contract markets, including Bank Secrecy Act compliance, customer identification programmes, and suspicious activity reporting to FinCEN. If jurisdiction shifts to state gaming authorities, the AML framework changes: state gaming licences in most jurisdictions carry their own AML requirements, some of which are more prescriptive than federal commodity-market rules and some of which are less so.
What this means for B2B clients with exposure
Accounting firms and CFOs with clients who hold positions on prediction market platforms, or who have invested in prediction-market operators, face a two-phase risk. In the near term, the uncertainty itself creates an accounting disclosure question: material regulatory contingencies require consideration under ASC 450 or IAS 37, depending on the reporting framework. In the medium term, a jurisdictional shift could alter the tax treatment of gains and losses on event contracts. Contracts classified as Section 1256 contracts under federal commodity rules receive 60/40 capital gains treatment; contracts reclassified as gambling income under state gaming law would lose that treatment entirely and be taxed as ordinary income.
Firms already using crypto bookkeeping software to track digital-asset positions should flag whether their systems currently categorise prediction-market contract gains under a commodity or a gaming tax rule set, because a Supreme Court decision could require a retrospective reclassification across all open and recently closed positions.
AML red-flag considerations
For compliance teams, the manipulation risk the NFL highlighted is also an AML red flag in its own right. Insider-driven manipulation of event-contract outcomes, if it generates proceeds, could constitute money laundering, and the proceeds could flow through digital asset wallets or on-chain settlement mechanisms. Firms onboarding clients who trade actively on prediction markets should consider whether those activity patterns warrant enhanced due diligence, particularly where large positions in narrow-outcome contracts are held close to the event date. Our primer on AML red flags for compliance teams sets out a practical framework for structuring those reviews.
Tax Accounting Considerations for Individual Traders
Individual filers who use prediction market platforms should already be reporting gains and losses from event contracts. The current federal position, while Kalshi operates as a CFTC-regulated designated contract market, is that qualifying contracts may be treated as Section 1256 contracts, giving them the 60/40 split between long-term and short-term capital gains rates regardless of actual holding period. That is a significant tax advantage compared with ordinary income treatment.
A Supreme Court ruling against CFTC jurisdiction would not automatically change this treatment from one day to the next: Congress or the IRS would need to act. But the risk of a retrospective IRS challenge to 1256 treatment on sporting-event contracts would increase materially if the Court signals that these contracts are gambling instruments rather than commodity derivatives. Individual traders should document the regulatory basis on which they are reporting now, and retain records that would support an alternative calculation if the rules change.
Keeping track of those positions accurately is exactly where digital asset accounting software adds value: the ability to run parallel calculations under different tax-treatment assumptions before any ruling is handed down gives filers time to plan rather than scramble. Separately, our coverage of the Digital Asset Tax Certainty Act proposals outlines how Congress is also approaching the broader question of how digital-asset instruments should be classified for tax purposes.
What to Watch Next
The Supreme Court has several options. It can grant certiorari and hear the case, deny certiorari and leave the lower-court decision in place, or hold the petition while it awaits a related case. The Kalshi response, due by 9 November, will set out the company's arguments against review. After that, the Court's conference schedule will determine when, and whether, a decision on certiorari is announced.
In the meantime, firms should watch for any CFTC rulemaking or guidance addressing event-contract classifications, any state-level enforcement actions that could themselves be appealed, and any IRS guidance on the tax treatment of prediction-market gains in light of the litigation. The Better Markets analysis of CFTC authority over retail markets, covered in our earlier piece on whether the CFTC is the right regulator for retail crypto, provides useful background on the institutional tensions that make this case so difficult to predict.
Source: Cointelegraph
Frequently Asked Questions
What is the core legal question the Supreme Court is being asked to resolve?
The petition asks the Court to decide whether prediction market platforms that offer sporting-event contracts operate under CFTC jurisdiction as commodity derivatives or fall under state gaming law. Resolving that question would also clarify whether the CFTC's federal licence pre-empts state gaming regulations.
How does the jurisdictional outcome affect the tax treatment of prediction-market gains?
Under current CFTC-regulated status, qualifying event contracts may be treated as Section 1256 contracts, subject to the 60/40 capital gains rate regardless of holding period. If jurisdiction shifts to state gaming law, those contracts could be reclassified as gambling income and taxed at ordinary income rates. IRS or Congressional action would be needed to formalise any change.
What AML obligations apply to prediction market platforms right now?
As a CFTC-registered designated contract market, Kalshi is subject to Bank Secrecy Act obligations, including customer identification, suspicious activity reporting to FinCEN, and anti-money-laundering programme requirements. A shift to state gaming jurisdiction would replace those obligations with the AML rules of each relevant state gaming authority, which vary considerably.
Do accounting firms need to disclose this regulatory uncertainty on client financial statements?
Where a client holds material positions on prediction market platforms or has a significant investment in a prediction market operator, the ongoing litigation and jurisdictional uncertainty could constitute a contingent liability or a disclosure item under ASC 450 (US GAAP) or IAS 37 (IFRS). Firms should assess materiality and document their judgement.
When will the Supreme Court decide whether to hear the case?
No date has been set. Kalshi has until 9 November to file its response to the New Jersey petition. After that, the Court will consider the petition at one of its private conferences. There is no fixed deadline for the Court to announce its decision on certiorari.