New Jersey Lawmakers Propose Regulatory Compromise on Sports Event Contracts
New Jersey state senators Nicholas Scutari and Paul Sarlo introduced legislation Wednesday that represents the most detailed attempt yet by a state legislature to regulate prediction markets without directly contesting the federal preemption argument that has dominated litigation over the past two years.
Senate Bill 4447 establishes a regulatory framework for prediction markets, authorizes licensed athletic event markets, prohibits certain public officers and employees from working for athletic event market operators, and bars candidates and campaign staff from opening speculative positions on political markets.
The timing of this new bill is very much intentional. In April, the Third Circuit Court of Appeals ruled 2-1 that the Commodity Exchange Act preempts New Jersey’s attempt to regulate Kalshi’s sports-related event contracts, finding that the CFTC has exclusive jurisdiction over swaps traded on a federally licensed designated contract market. That ruling effectively foreclosed the approach New Jersey had been pursuing, a direct cease-and-desist order treating prediction markets as unlicensed sports betting. S4447 is Trenton’s attempt to find a different way in.
Lawmakers Created Three Prediction Market Categories They Don’t Want Available in New Jersey
The bill explicitly states that nothing in it shall be construed to conflict with the Commodity Exchange Act or to prohibit a prediction market platform from offering speculative positions authorized under federal law. That is a significant concession, and one that reflects the legal reality that New Jersey now operates under following the Third Circuit’s ruling. The bill does not attempt to relitigate preemption, as it has no legal basis to do so.
What it does instead is carve out three categories of prediction markets that the bill’s findings argue fall outside any legitimate federal financial regulation purpose: death markets, which allow wagers on the death, assassination, or attempted killing of a person; catastrophic event markets, covering war, natural disasters, mass shootings, and acts of terrorism; and political markets, covering elections for federal, state, county, and municipal office within New Jersey. The bill prohibits prediction market platforms from offering any of these three categories outright.
The legislative theory here is that these markets are not genuinely about price discovery or risk management in any conventional financial sense. A market on whether a public official will be assassinated does not serve a hedging function for any market participant. New Jersey is betting that a federal court evaluating these specific categories, rather than sports event contracts generally, would find them outside the scope of what the CFTC’s mandate is meant to protect.
Sports Event Contracts Will be Subject to the Same Tax Burden as Sportsbook Operators
Athletic event markets, defined under the bill as prediction markets enabling a participant to open a speculative position on the outcome of a sports event or horse race, are not banned. Instead, the bill seeks to route them through the existing sports-wagering regulatory apparatus. This comes just days after the CFTC proposed rules that would clearly separate what prediction market platforms and sportsbooks can offer as event contracts. New Jersey has proposed a different version, similar to those of other states.
Under the bill, an operator of an athletic event market must either hold a sports wagering license or obtain a new athletic event market operator license and enter into a partnership agreement with a licensed sports wagering operator. The athletic event market operator license carries an initial cost of $5 million, with annual renewal costs set by the Division of Gaming Enforcement, and applicants must meet qualification standards equivalent to those for casino key employees.
That structure effectively requires platforms like Kalshi to either become licensed sportsbooks themselves or partner with one of the operators that already are, such as DraftKings, FanDuel, or an Atlantic City casino licensee. Each sports wagering licensee would be permitted to operate up to three individually branded athletic event market websites and accompanying mobile applications.
The tax treatment makes the intent explicit. Athletic event markets would be subject to the same 19.75 percent tax applied to online sports wagering, plus an additional 10 percent surcharge, while other prediction markets would face a flat 10 percent surcharge on top of existing tax obligations. The differential tax rate, nearly 30 percent for sports markets versus 10 percent for other prediction markets, mirrors the competitive equity argument we have seen play out in Illinois and elsewhere: legislators are trying to ensure that platforms offering sports betting-equivalent products bear sports betting-equivalent tax burdens, regardless of how those products are federally classified.
New Jersey is Borrowing the Casino Industry’s Existing Playbook on Regulation
Much of the regulatory machinery the bill proposes for athletic event markets is lifted directly from New Jersey’s casino and sports wagering law. The bill requires age verification at 21, exclusion of self-excluded gamblers and individuals with insider information, daily and weekly deposit limits, mandatory problem gambling messaging, and a formal public awareness campaign administered by the Division of Gaming Enforcement covering the risks of athletic event markets and the differences between prediction markets and traditional sports wagering.
The bill also includes post-employment restrictions modeled on existing casino ethics law. State officers and employees would be barred for five years after leaving office from working for or representing an athletic event market operator, a longer restriction than the two-year period that applies to casino-related employment.
The Insider Trading Provisions Read Like a Response to Recent Prediction Market Headlines
Leading prediction market platforms have spent most of the last year focusing on how to combat insider trading. The bill clearly has insider trading in its sights as it bars state officers, employees, legislators, and their immediate family members from opening speculative positions in political markets or in any speculative position relating to their official duties, based on knowledge acquired through their position or that could reasonably be viewed as prejudicing their independent judgment. Candidates for office, along with their campaign staff and volunteers, face the same prohibition on political markets from the time they file for candidacy or join a campaign until the relevant election concludes. Violations carry fourth-degree criminal penalties.
That framework reads directly against the backdrop of the insider trading concerns that have surfaced repeatedly in prediction markets coverage this year, including the Santos case on Kalshi and the broader concern that officials with access to non-public information have structural advantages in markets tied to outcomes they can influence or foresee. The bill’s findings section explicitly cites multiple reported cases of public officials using insider information obtained through their public service to place wagers in prediction markets, describing the practice as corrosive to public trust.
S447 Represents a Strategic Shift at the State Level on Regulating Prediction Markets
S4447 was introduced in the Senate on June 11 and referred to the Senate Budget and Appropriations Committee, placing it in the early stages of the legislative process with no scheduled hearing yet. Whether it advances will depend in part on how the broader prediction-markets litigation develops. The Third Circuit’s preemption ruling has already drawn attention as a potential candidate for Supreme Court review, and a definitive ruling at that level could either validate New Jersey’s careful structuring or render parts of it moot.
For now, S4447 represents a notable shift in strategy. Rather than fighting the CFTC’s jurisdictional claim directly, as New Jersey did and lost, the bill tries to work within it, banning the categories of prediction markets least defensible as legitimate financial instruments while pulling sports-related contracts into the same licensing, taxation, and responsible gambling framework that already governs the casino and sportsbook industry the state has spent years building.
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