Mayer Brown's Nicole Saharsky Talks Winning Playbook in 9th Circuit Prediction Market Fight

The "number one [lesson] is to try to put yourself in the judges' position," Saharsky said. "The more you work on a case, the easier it is to forget what it was like when you first learned about the case and the issues. The judges and their clerks don't have that same background about the case, and they're going to come in with questions about how things work. So, it's important to be able to answer those questions and not to assume too much information because you've thought about the case for a long time."

Mayer Brown partner Nicole Saharsky wasn’t all that familiar with the language of sports betting before she took on Nevada's defense over a year ago in its prediction markets' fight over the state’s application of gambling laws to sports event contracts.

"Not everyone out there is betting on parlays or props," she said in an interview with Law.com this week.

"I didn't know [the] terminology of all these different things that people would bet on—not just the outcome of a game, but the points scored or what this player does, and... combo bets that address different players' performances in different games,” added Saharsky, co-head of the firm’s Supreme Court and appellate practice group. “There's a lot to learn for people who aren't familiar with the world of sports betting.”

In August, Saharsky scored a win for Nevada in the U.S. Court of Appeals for the Ninth Circuit when a three-judge panel ruled that the contracts are bets subject to state gambling rules—not “swaps” that fall under the exclusive jurisdiction of the U.S. Commodity Futures Trading Commission. The ruling created a split with the Third Circuit.

Saharsky talked to talk about how she prepared for the April oral arguments—and the importance of making clear the "real-world implications" of a case. Before joining Mayer Brown, Saharsky served as an assistant to the U.S. solicitor general from 2007 to 2017, where she argued many cases before the U.S. Supreme Court. Across her career, Saharsky has gone before the justices 32 times.

The following interview has been edited for length and clarity.

This issue has been before several courts, and it's been Big Law firms representing the prediction markets, and state attorneys general representing the states. So, how did Mayer Brown end up arguing for the state of Nevada?

We were hired actually quite some time ago— I think it is over a year ago now—to represent the state of Nevada. Because this is such an important issue for the state, they decided why not have the best folks in the attorney general's office plus some help from private practice, [given] the immense importance of the issues. We came in at the district court level and argued before Judge Gordon, got the opinion where Judge Gordon ruled in the state's favor, and then continued to help with the case as it went up on appeal.

Did you have experience previously arguing cases involving state gambling laws, or was this your first foray into that area?

I had some background knowledge. And certainly the issues raised in the case, which are fundamental issues of state sovereignty and preemption, are things that I worked on, particularly during my time with the federal government, and had some familiarity with. When our firm was asked to help with this case, I was happy to jump in because I think the issues are fascinating, and I think the states are on the right side of it, so it was a good match.

By the time that the oral arguments in the Ninth Circuit came up, the Third Circuit a month prior had issued its decision siding with the prediction markets [and against the state of New Jersey]. How did that play into how you prepped [and] your mindset going into the arguments?

We had won below in the District of Nevada, so we felt that the judge wrote a good opinion, and the Court of Appeals would be reviewing that opinion. But the Court of Appeals would also know about the Third Circuit's decision and have to think about what those judges [thought]? What was their reasoning? Do we find it persuasive? From our perspective, there was a question of ... where did we think that the [Third Circuit] judges there got it wrong? Did we think that they overlooked any issues or kind of failed to address any issues? How would we tell the Ninth Circuit judges not to follow their bottom line?

You really emphasized during the arguments that the other side lacked a limiting principle, and you warned there would be “huge consequences” if the panel accepted the prediction markets’ arguments. How important was that for you to make sure that the panel understood the realworld, practical consequences, beyond just the theoretical?

It's immensely important because what the prediction markets want to do, in our view, is a fundamental shift in the federal versus state balance of power. Our view, and I think the longstanding understanding, is that the states get to regulate gambling, and in particular, sports betting. The Supreme Court said that in the Murphy vs. NCAA decision.

Now you've got folks coming in the prediction markets and offering what looks to us the same thing as sports betting, and saying that the states can't regulate it. So just as a question of the state's traditional power and taking away that power, that to us was a big issue to begin with.

Then, as you look at why the prediction markets say their event contracts are swaps, the rationale they use is one that's so broad that it would make betting on anything a swap. That, I think, is where you get to the point that you would say, "Well, it's not just that there's an intrusion on state authority; it's this huge amount of power to regulate gambling that would go to the federal CFTC." Before a court should do that, it should think really seriously. Is that what Congress intended? That is the broad point we were trying to get across to the court.

Another unique thing about this oral argument was that the CFTC appeared as amicus and took Kalshi’s position. As an advocate, what's the challenge of arguing against the position advanced by the federal agency that's charged with administering the statute [at issue]?

It's another person participating in oral argument who doesn't share your views, so it's more to respond to. And in this case, it was a somewhat unique situation because the CFTC was appearing to try to get more power for itself. I think there's a real question in those circumstances about ... what kind of consideration should the courts give of an agency's view when it's the agency trying to get more power for itself? That made it an interesting situation for the CFTC to participate in this argument, and [generated] questions for the court about what it should do with the CFTC's opinions.

What are some of the main lessons or takeaways that you have from this oral argument experience?

Number one is to try to put yourself in the judges' position. The more you work on a case, the easier it is to forget what it was like when you first learned about the case and the issues. The judges and their clerks don't have that same background about the case, and they're going to come in with questions about how things work. So, it's important to be able to answer those questions and not to assume too much information because you've thought about the case for a long time.

And being able to address real-world implications and examples matters in any case. One of the questions was, "Do these sports event contracts qualify as swaps?" It helps to not ask that question in the abstract, but to talk about what exactly they are: [For example,] a contract about whether some person will score in the third period of a hockey game at the same time that this other person is ejected from another game. What color will the Gatorade shower be after this team wins this game? Betting on that, is that the kind of thing that you think that the Commodity Futures [Trading] Commission was designed to address? So taking concrete examples from the briefs and from the record helps make the arguments less abstract.

What comes next in this Ninth Circuit appeal?

There are two cert petitions pending from the Ninth Circuit decisions. There were three parties there: Kalshi, Crypto.com and Robinhood. So the court actually issued three separate opinions in those cases. They weren't consolidated into one case. Crypto.com and Robinhood have filed cert petitions, and Kalshi has sought rehearing en banc in the Ninth Circuit.

Now, there are cert petitions pending from the entities in the Nevada cases, and one from New Jersey. It's a question of whether the Supreme Court will take one or more of those cases.