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 gambling statutes for sports-event contracts on Kalshi
- The CFTC maintains it holds sole regulatory authority over prediction markets, classifying event-based contracts as swaps
- Federal circuit courts are producing inconsistent decisions, with the Third Circuit backing Kalshi while the Ninth Circuit supports Nevada’s position
- The CFTC initiated legal action against Arizona, Connecticut, and Illinois to prevent state-level regulation of prediction market platforms
In a significant legal development, a federal appellate court has prevented New Jersey from closing down Kalshi’s sports-focused prediction markets, determining that federal regulations supersede state-level gambling restrictions.
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 US Court of Appeals for the Third Circuit delivered a 2-1 verdict supporting Kalshi, the prediction market operator. The judicial panel determined that New Jersey gaming regulators lacked authority to pursue enforcement measures against the platform.
According to the judges, Kalshi’s sports-related contracts fall under the purview of the federal Commodity Exchange Act. This federal framework means state gambling regulations cannot be imposed on these products.
“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 judicial opinion emphasized that the CFTC has neither determined Kalshi’s sports-related offerings violate public interest standards nor pursued any enforcement measures against the company.
Kalshi’s Chief Executive Tarek Mansour characterized the decision as “a big win for the industry and millions of users” in a statement shared on X.
In her dissenting opinion, Circuit Judge Jane Roth argued that Kalshi’s offerings constitute “sports gambling” and are “virtually indistinguishable” from products available on traditional wagering platforms. She referenced contracts involving NFL game outcomes, point differentials, and cumulative scores as supporting evidence.
Divergent Judicial Interpretations Create Legal Uncertainty
Multiple states nationwide have initiated litigation and issued cease-and-desist directives targeting prediction market operators, including Kalshi and Polymarket. State authorities contend these services breach state gambling statutes.
Court determinations have varied considerably. While Monday’s Third Circuit ruling benefits Kalshi, the Ninth Circuit rejected the company’s request last month to prevent Nevada from obtaining a temporary restraining order.
Additionally, a Nevada district judge prolonged restrictions on Kalshi’s operations just prior to Monday’s appellate decision. The Ninth Circuit has scheduled another hearing involving several companies for later this month.
Federal Regulator Challenges State Authority
Since assuming his position, CFTC Chair Michael Selig has prioritized prediction markets as a key regulatory concern. He has consistently maintained that the CFTC possesses “exclusive jurisdiction” over event-based contracts.
The previous week, the CFTC filed lawsuits against Arizona, Connecticut, and Illinois to halt what the agency characterized as unauthorized state attempts to regulate prediction market operations.
During an appearance at Vanderbilt University on Monday, Selig explained that the agency’s commodity definition encompasses a wide scope, treating sports outcomes, political developments, and conventional agricultural products like corn and wheat under the same regulatory framework.
The CFTC has additionally submitted an amicus brief asserting its jurisdictional stance in the Ninth Circuit prior to the upcoming hearing.
The jurisdictional dispute between state and federal authorities regarding prediction market oversight continues to intensify, with numerous legal proceedings advancing through various court systems concurrently.
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