Trade Handle is covering NEXTPredict NYC live from New York City, where prediction market executives, legal experts, and regulators are discussing some of the industry's biggest challenges. One of Friday morning's most interesting sessions, The Jurisdiction Gap: One Ruling, Two Very Different Markets, focused on a question that could completely change how prediction markets operate across the United States.
The panel featured Kalshi Head of Litigation Jovy Dedaj, Gemini Titan General Counsel Brigitte Weyls, Milbank partner Josh Sterling, and Princeton Public Affairs Group partner Bill Pascrell III. Bloomberg Intelligence litigation analyst Elliott Stein moderated the discussion, which explored conflicting federal court rulings, the possibility of Supreme Court intervention, and what happens if states gain greater authority over sports event contracts.
Kalshi Says 50 Different State Rules Won't Work
One of the strongest comments came from Dedaj, who explained why Kalshi continues fighting for exclusive federal oversight of prediction markets. "The jeopardy of being subject to the 50 different state regulators is the biggest issue right now," Dedaj said. Kalshi maintains that contracts traded on federally registered exchanges should fall under the CFTC's exclusive jurisdiction. However, recent court decisions have reached different conclusions about whether sports event contracts qualify as swaps and whether state laws can apply.
Dedaj argued that operating a national exchange while complying with conflicting state requirements creates serious practical problems. "Complying with one federal regulator, 50 different states is just impossible," Dedaj said. Then pointed to situations where state court orders and federal regulatory requirements have placed Kalshi in difficult positions, particularly when exchanges are instructed to handle existing contracts differently.
Supreme Court Decision Could Take Longer Than Expected
The possibility of a Supreme Court ruling was a major theme throughout the conversation, but Pascrell warned against expecting a quick resolution. "If anybody tells you they know what's going to happen here," Pascrell said, they probably want people to think they have all the answers. He suggested that the legal fight could take considerably longer than some industry participants expect.
"I do think it's not going to happen as soon as many of you would like," Pascrell said. The uncertainty comes as federal appeals courts have issued conflicting decisions involving prediction market contracts. New Jersey has already asked the Supreme Court to review the dispute, potentially setting up a major decision on federal versus state authority.
Industry Investment isn't Slowing Down
Despite the uncertainty, Sterling said he hasn't seen businesses abandoning their plans to enter prediction markets. When asked whether companies were waiting for greater legal clarity before investing, his response was straightforward. "No, I don't think so," Sterling said.
He explained that companies continue to invest substantial resources in developing products and improving market technology, even as the courts work through jurisdictional questions. "The people that are interested in funding the development and strengthening the market ... are not going away," Sterling said. Sterling also suggested that the legal disputes are part of a much larger shift in financial market infrastructure, with prediction markets becoming one example of how trading technology is changing.
A Federal Victory Could Open the Door to More Products
The panel also explored what would happen if the Supreme Court ultimately supported exclusive federal regulation of event contracts. Weyls suggested that such a ruling could make federally registered exchange licenses more valuable and encourage additional companies to enter the market.
"I think you'll also see some consolidation," Weyls said. She also discussed the possibility of exchanges introducing additional financial products, including contracts tied to individual stocks. Dedaj emphasized that Kalshi remains focused on innovation and expanding its offerings, while also seeking greater clarity from federal courts.
Even a State Victory Might Not Stop Prediction Markets
Not everyone on the panel believed an unfavorable Supreme Court decision would threaten the industry's future. Weyls compared the situation to the early regulatory battles surrounding cryptocurrency, arguing that legal challenges haven't prevented new financial technologies from developing.
"The markets continue. The markets innovate. They always do," Weyls said. She suggested that prediction markets could become more regionalized or shift toward different products if states retain greater authority over sports contracts. Sterling similarly argued that companies would still have opportunities to develop other products, even if certain contracts became harder to offer nationwide.
State Regulators Could Face Their Own Challenges
Pascrell offered one of the panel's more provocative perspectives, suggesting that a ruling favoring federal authority could force state regulators to reconsider their roles. He argued that a nationwide framework could change the economics of state-by-state licensing and pressure regulators to adopt new arrangements.
Sterling pushed back on the suggestion that federal oversight would eliminate the need for traditional state-regulated sportsbooks. "I don't think it's the end of the road for sportsbooks at all," Sterling said. He argued that prediction markets and traditional sportsbooks serve different purposes and could continue operating alongside one another.
The Trade Handle Prediction Markets Take
The discussion at NEXTPredict NYC made clear that the industry's legal uncertainty is far from settled, even as companies continue investing and expanding. Kalshi's concerns about conflicting state and federal requirements stood out, especially as the company continues to fight multiple legal battles.
At the same time, the panel showed that industry participants aren't necessarily waiting for the Supreme Court before making their next moves. Whether prediction markets eventually operate under one national framework or face a more complicated state-by-state system, court decisions could shape the industry for years.