Key Takeaways
- The Third Circuit Court of Appeals delivered a 2-1 decision preventing New Jersey from applying state gambling regulations to Kalshi’s platform
- Federal judges determined the Commodity Exchange Act supersedes state-level gaming enforcement for contracts involving sports events
- The CFTC maintains it holds sole regulatory authority over prediction market platforms, classifying event-based contracts as swaps
- Federal circuit courts are delivering contradictory judgments, with the Third Circuit backing Kalshi while the Ninth Circuit supports Nevada’s position
- The CFTC initiated legal proceedings against Arizona, Connecticut, and Illinois last week to prevent state-level regulation of prediction markets
In a significant legal development, a federal appellate court has prevented New Jersey state regulators from closing down Kalshi’s sports-based prediction markets, determining that federal commodity legislation supersedes state gaming regulations.
New Jersey has no right to ban Kalshi’s prediction market, US appeals court rules – Engadget pic.twitter.com/uPnPvLMstR
— Evan (@StockMKTNewz) April 6, 2026
On Monday, the Third Circuit US Court of Appeals issued a 2-1 decision supporting Kalshi, the prediction market operator. The panel concluded that New Jersey’s gaming enforcement agencies lacked authority to pursue legal action against the platform.
According to the judicial panel, Kalshi’s sports-related contracts fall under federal Commodity Exchange Act provisions, placing them beyond the reach of state gambling statutes.
“Kalshi self-certified compliance with the applicable laws and regulations, so those event contracts were presumptively approved under federal law,” the majority ruling said.
The decision emphasized that the CFTC has neither determined Kalshi’s sports-related offerings violate public interest standards nor pursued enforcement measures against the company.
In an X platform statement, Kalshi CEO Tarek Mansour characterized the judgment as “a big win for the industry and millions of users.”
Circuit Judge Jane Roth filed a dissenting opinion, arguing that Kalshi’s offerings constitute “sports gambling” and remain “virtually indistinguishable” from traditional betting platform products. Her critique highlighted contracts covering NFL game outcomes, point spread predictions, and scoring totals.
Divergent Legal Interpretations Across Federal Circuits
Multiple state governments nationwide have initiated lawsuits and issued cease-and-desist directives targeting prediction market operators, including Kalshi and Polymarket, claiming these services breach state gaming statutes.
Court determinations have been contradictory. While Monday’s Third Circuit ruling supports Kalshi’s position, the Ninth Circuit rejected last month a request to prevent Nevada from obtaining a temporary restraining order against the identical company.
Days before the Third Circuit’s ruling, a Nevada district judge also prolonged an injunction against Kalshi. The Ninth Circuit has scheduled another multi-party hearing for later this month.
CFTC Challenges State Regulatory Authority
Since assuming leadership, CFTC Chair Michael Selig has prioritized prediction market oversight, contending the agency possesses “exclusive jurisdiction” over event-based contracts.
The CFTC filed lawsuits last week against Arizona, Connecticut, and Illinois, seeking to halt what it characterizes as unauthorized state attempts to regulate prediction market operations.
During a Monday address at Vanderbilt University, Selig explained the commission’s commodity definition encompasses diverse categories equally, including athletic competitions, electoral outcomes, and conventional agricultural products such as corn and grains.
The CFTC additionally submitted an amicus curiae brief advancing its jurisdictional arguments to the Ninth Circuit in preparation for the upcoming hearing.
The jurisdictional dispute between federal and state regulatory bodies over prediction market authority continues evolving, with numerous parallel legal challenges advancing through various court systems.
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