(AsiaGameHub) – By: Jonathan Barrett
This isn’t just a routine regulatory tweak for new fintech products. It’s an open power grab between state regulators and the CFTC over who gets to tax and control prediction markets. New Jersey isn’t the first state to move against these platforms. This bill is still the most aggressive push yet to reclassify prediction trades as gambling, not financial swaps. The entire existing framework of regulatory jurisdiction over speculative trading is now on the line.
The bill comes from Senate President Nicholas Scutari and Democratic Senator Paul Sarlo. It draws a direct line between sports prediction contracts and traditional sportsbooks. All operators need a state permit to work in New Jersey. Violators face fines up to $25,000. Sports trades get taxed at the standard 19.75% sports betting rate, plus an extra 10% surcharge. Even non-sports trades pay the 10% surcharge. Operators pay a $5 million initial licensing fee, with annual renewal reviews for possible hikes.
The bill adds less controversial clauses that the CFTC is less likely to challenge. It bans public officials from working at athletic prediction markets. It blocks political candidates and their campaign staff from trading on political prediction markets. Late last week, the bill was sent to the Senate Budget and Appropriations Committee. Democrats hold full control of New Jersey’s legislature and governor’s office. This bill has a clear path to pass, barring unexpected last-minute changes.
The CFTC has already claimed exclusive federal jurisdiction over prediction markets. It says these trades are swaps, not wagers. The agency just sued New Mexico earlier this month over similar actions against Kalshi. It openly hinted more lawsuits are coming for other states that challenge its authority. Similar legal battles are already ongoing in Ohio, Rhode Island and Illinois. States want the tax revenue from these growing platforms, and won’t cede it easily.
Kalshi already caught wind of the shifting regulatory tide. Earlier this month, it announced it would restrict certain users on higher-risk markets. It started screening for potential insiders to pre-empt regulatory pushback. Smaller prediction market operators are already weighing their compliance options. Most don’t have the cash to cover a $5 million upfront licensing fee. Only the largest, well-funded players will be able to meet the new requirements if the bill passes.
This conflict will end up before the U.S. Supreme Court within the next two years.
Author bio: Jonathan Barrett, lead focus editor for an independent overseas public affairs weekly covering U.S. regulatory policy.