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New Jersey Attorney General Jennifer Davenport is spearheading a bipartisan effort to push back on what states see as federal overreach into sports wagering regulation.
In a letter to the Commodity Futures Trading Commission, Davenport joined 40 other attorneys general urging the agency to reaffirm that authority over sports wagering – including emerging prediction markets – belongs to the states.
The coalition’s argument centers on the rapid rise of platforms like Polymarket and Kalshi, which allow users to trade contracts tied to the outcomes of sporting events. According to the attorneys general, those offerings closely resemble traditional, and regulated, New Jersey sportsbooks but operate outside state regulatory frameworks.
Davenport said in a statement:
“Prediction markets have no right to offer sports gambling in New Jersey in violation of the bedrock rules that other wagering operations follow.”
States argue prediction markets mirror sportsbooks
At the heart of the dispute is whether prediction markets fall under federal commodities law or state gambling oversight. The AGs contend the distinction is largely meaningless in practice.
“Any distinction between sportsbook bets and prediction-market bets is illusory. On so-called ‘prediction markets,’ users can make all the same wagers they can make at a traditional sportsbook.”
The letter highlights that users on these platforms can bet on game outcomes, point spreads, and even player props, which are all staples of regulated platforms.
However, unlike licensed operators, prediction market platforms are not subject to the same consumer protections, tax obligations, or responsible gambling requirements.
Concerns over consumer protections and public health
Davenport and her counterparts also raised concerns about the potential risks tied to unregulated sports wagering. States have built robust regulatory systems in recent years, particularly after the 2018 repeal of PASPA, to address issues like problem gambling, fraud, and insider wagering.
The coalition warned that allowing prediction markets to operate outside those systems could undermine those safeguards, Davenport said.
“States have had longstanding authority to oversee all gaming within their borders.”
The letter notes that millions of Americans already struggle with problem gambling, arguing that states are better positioned than federal agencies to address those challenges.
CFTC rulemaking under scrutiny
The multistate effort comes in response to a CFTC request for public comment on proposed rules governing prediction markets. The AGs are urging the agency to explicitly clarify that sports-related contracts fall outside its jurisdiction.
Those activities should remain under state control, consistent with longstanding legal precedent that assigns gambling oversight to individual states, the coalition wrote.
“The CFTC should recognize the limits of its power and affirm that states have the expertise, experience, and tools to regulate sports betting as they have for more than a century.”
Broad bipartisan support
The letter drew support from a wide range of states across the political spectrum, including Pennsylvania, New York, Nevada and Ohio. In total, 41 attorneys general signed on, underscoring the growing concern among states about the expansion of prediction markets into sports wagering territory.
For New Jersey, one of the nation’s most mature markets, the issue carries particular weight. The state has long positioned itself as a leader in regulated online gambling, making the emergence of unregulated alternatives a key point of contention.
As federal regulators consider next steps, the outcome could have significant implications for how sports wagering evolves nationwide – and who ultimately controls it.
Ongoing legal fight in New Jersey
The push from Davenport and other attorneys general comes as New Jersey faces setbacks in its own legal battle over prediction markets.
Earlier this year, a federal appeals court ruled that the state cannot enforce its sports wagering laws against Kalshi while its lawsuit proceeds. The Third Circuit found that Kalshi could continue operating under federal oversight as litigation plays out, dealing a blow to state regulators’ efforts to shut it down.
The ruling prompted calls from state lawmakers to continue the fight. As previously reported by PlayNJ, legislative leaders have urged an appeal, signaling that the state is not backing down despite the court setback.
The case hinges on whether prediction market contracts qualify as federally regulated financial instruments or illegal sports wagering under state law – a question that could ultimately reshape how the industry is governed nationwide.
