A Third Circuit panel has ruled that New Jersey cannot impose a temporary ban on prediction market platform Kalshi, delivering a significant legal victory for the company. The court determined that Kalshi’s sports-event contracts are governed by federal law rather than state gambling regulations. The decision has broad implications for how prediction markets operate across the United States.
At the center of the dispute is whether Kalshi’s sports-related contracts constitute gambling under New Jersey law or fall within the scope of the Commodity Exchange Act, a federal statute. The Third Circuit sided with the federal framework, concluding that the contracts are subject to federal commodity regulations. This effectively shields Kalshi from state-level enforcement actions targeting its sports offerings.
The court’s reasoning rested in part on the role of the Commodity Futures Trading Commission, the federal regulator overseeing such contracts. Because the CFTC has not determined that Kalshi’s self-certified sports contracts are contrary to the public interest, the panel found those contracts to be presumptively approved. The absence of any enforcement action by the CFTC against Kalshi further supported the court’s conclusion.
Kalshi operates as a regulated prediction market, allowing users to take positions on the outcomes of real-world events, including sporting contests. The platform has argued that its products are legally distinct from traditional sports betting, which is regulated at the state level. This ruling reinforces that position, at least within the Third Circuit’s jurisdiction.
The decision raises questions about the extent to which states can regulate or restrict federally sanctioned financial products that touch on sports outcomes. New Jersey had sought to block Kalshi’s operations within the state, but the court’s ruling prevents that temporary prohibition from taking effect. Legal observers note the case could influence how other states approach similar platforms going forward.
Originally reported by CoinDesk.
