US Supreme Court Expected to Decide Future of Sports Prediction Markets

The legal landscape for online gambling in the United States is on the brink of a historic shift that could have international implications. At the heart of the matter is whether so-called prediction markets, where users trade contracts on the outcome of sports events, should be legally classified as financial derivatives or traditional sports bets. While providers like Kalshi argue that their products fall under the jurisdiction of the Commodity Futures Trading Commission (CFTC), U.S. states and tribal nations view this as an attack on their decades-old sovereignty in gambling regulation.

The legal battle lines have reached an enormous scale. Approximately 80 cases are currently pending in state and federal courts. Experts are observing an interesting trend in the rulings. While about 85 percent of decisions so far have gone against prediction markets, recent high-level rulings have caught the industry's attention. A particularly significant ruling by the U.S. Court of Appeals for the Third Circuit occurred in May, where a 2-1 decision favored Kalshi. This temporarily blocked a cease-and-desist order from the state of New Jersey issued in March 2025.

Numbers and facts

Joe Webster, a partner at the law firm Hobbs Strauss, emphasizes the intensity of the past 18 months, during which states, companies, and tribes have sued each other in various configurations. A central point is the interpretation of the Commodity Exchange Act (CEA). The majority of judges in the Third Circuit held that sports event contracts are financial instruments or swaps, falling under the exclusive jurisdiction of the CFTC. However, Judge Jane Richards Roth strongly disagreed in her dissenting opinion. She argued that these contracts are practically indistinguishable from traditional sports betting and should therefore remain subject to state gambling regulations.

It is currently expected that New Jersey will file a petition for review with the Supreme Court by September 3. In addition to the Third Circuit, cases are fully briefed at the Fourth, Sixth, and Ninth Circuits. If these courts reach differing conclusions, creating what lawyers call a circuit split, it significantly increases the likelihood that the Supreme Court will take up the case.

Background

For tribal nations, a great deal is at stake. Scott Crowell of the Crowell Law Office Tribal Advocacy Group warns that recognizing these markets as pure financial products could devalue the hard-fought compacts between tribes and states. For about 25 years, the understanding has been that gaming on Indian lands is strictly regulated under the Indian Gaming Regulatory Act (IGRA).

„We lived with 25 years of understanding that the only gaming that can occur on Indian lands is gaming that is approved by tribes. So this is illegal. The district court in Wisconsin said as much." - Scott Crowell, Attorney for the Tribal Advocacy Group

Crowell argues that when Congress passed the Dodd-Frank Act in 2010, it never intended to preempt two centuries of jurisprudence regarding state and tribal gambling regulation. Prediction markets, conversely, are attempting to use the principle of federal preemption to bypass state licensing requirements, taxes, and consumer protection rules.

Why it matters for German players

For German players who strictly adhere to legal offerings, the situation remains clearly defined. In Germany, the legal situation is unambiguous due to the Interstate Treaty on Gambling 2021 (GlüStV 2021). Any form of sports betting or gambling-like betting on events requires a German permit. The Joint Gambling Authority of the States (GGL) maintains a so-called whitelist, which lists all legal providers.

A significant difference from U.S. prediction markets is German player protection. In Germany, strict limits apply, such as the monthly deposit limit of 1,000 euros via the LUGAS system and the stake limit of 1 euro per spin for virtual slots. As long as a provider does not hold a GGL license, the offer is illegal in Germany. The U.S. legal dispute shows, however, how important a clear distinction between financial betting and gambling is to prevent the regulatory framework from being diluted. German players should avoid offers without the GGL seal, as neither payout security nor data protection according to German standards is guaranteed there.

What it means for GGL-licensed casinos

For licensed German casinos and betting providers, the U.S. debate represents a confirmation of their regulated market position. If financial derivative platforms could suddenly offer sports betting without the usual taxes and social contributions, a massive competitive disadvantage would arise. German providers invest large sums in complying with GlüStV 2021. A softening of the definition of gambling, as discussed in the USA, could eventually lead to calls in Europe for new regulatory models for hybrid products. For now, however, the GGL ensures that such gray-market products do not gain legal market access.