The National Football League (NFL) has filed a document with the U.S. Supreme Court in support of New Jersey authorities in a dispute involving the prediction market platform Kalshi. The league argues that contracts based on sporting events should be classified as gambling rather than financial derivatives.

In its submission dated October 8, the NFL requested that the Supreme Court review the case Flaherty v. KalshiEX. The NFL is acting as an amicus curiae, providing its perspective to the court even though it is not directly involved in the litigation.

This case revolves around the jurisdiction of the U.S. Commodity Futures Trading Commission (CFTC) and state regulators.

Kalshi maintains that contracts regarding the outcomes of sports events qualify as swaps, which would place them under federal oversight. This classification allows the platform to offer such contracts without needing betting licenses in every state.

The NFL disagrees with this interpretation. The league contends that financial derivatives are typically utilized for hedging risks and price discovery, whereas purchasers of sports contracts are merely betting on event outcomes without any associated financial stake.

Additionally, the NFL pointed to inconsistencies in federal appellate court decisions. Previously, the Sixth Circuit permitted Ohio and Tennessee authorities to enforce local gambling laws on Kalshi's sports contracts.

A similar stance was taken by the Ninth Circuit in a case involving Nevada, while the Third Circuit sided with Kalshi in its dispute with New Jersey.

Concerns Over Manipulation and Insider Trading

The NFL argues that CFTC regulation fails to sufficiently protect sports events from manipulation and insider information exploitation.

The league has called for the imposition of restrictions on prediction markets similar to those applied to traditional bookmakers. Proposed measures include:

  • a ban on certain types of bets;
  • raising the minimum age of participants to 21;
  • enhanced collaboration between operators and sports leagues.

NFL representatives have also criticized what they view as inadequate measures by the CFTC to prevent abuses.

The league highlighted the growing impact of prediction markets on the sports industry. According to its data, trading volume for contracts tied to American football reached $1.8 billion on the first Sunday of the NFL season, out of a total of $3.3 billion in prediction markets.

Kalshi has rejected the NFL’s claims. A spokesperson for the platform, Elizabeth Diana, stated that the CFTC is already overseeing sports markets and that the regulator's new rules address many of the league's concerns.

The company emphasized that preventing manipulation is a priority and noted its collaboration with other sports organizations.

From Regulatory Demands to the Supreme Court

In July, the NFL had previously urged the CFTC to impose restrictions on sports prediction markets.

At that time, the league suggested banning contracts on events that could be influenced by individual players or small groups, citing examples like a missed field goal or an inaccurate first pass by a quarterback.

Currently, the NFL is seeking a judicial resolution to a more fundamental question — whether contracts in prediction markets should be solely regulated by the CFTC or if state authorities have the right to govern them as gambling.

According to Reuters, Kalshi must respond to New Jersey's motion by November 9. A decision from the Supreme Court on whether to take up the case is expected by December.

It is worth noting that at the end of September, Crypto.com, Hyperliquid, and Predictit received letters from the U.S. House Oversight Committee demanding the disclosure of internal data. This is part of an investigation into potential insider trading in prediction markets.

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