A federal appeals court in Philadelphia has ruled that New Jersey cannot regulate prediction market platform Kalshi under existing state gambling laws. The three-judge panel of the Third Circuit Appeals Court decided 2-1 on Monday that wagers on Kalshi, including those tied to sports outcomes, fall exclusively under federal oversight by the Commodity Futures Trading Commission (CFTC). The ruling affirms a preliminary injunction issued last spring that blocked New Jersey from enforcing a ban on the platform.
The dispute began when New Jersey gambling regulators sent Kalshi a cease-and-desist order, contending that the platform’s sports-related markets were effectively unregistered sports bets operating under a different label. Kalshi countered that its offerings are event contracts subject solely to CFTC jurisdiction. Last April, a federal judge in New Jersey sided with Kalshi, finding the company was likely to prevail on the merits of its case and blocking the state from enforcing its ban while litigation continued.
The two judges forming Monday’s majority are Chief Judge Michael A. Chagares, appointed to the Third Circuit by former President George W. Bush, and Judge David J. Porter, appointed by President Donald Trump. Their decision affirmed the lower court’s original ruling, concluding that Kalshi’s registration as a designated contract market places its products within the federal regulatory framework rather than state gambling statutes.
The sole dissenting voice was Judge Jane R. Roth, appointed in 1991 by former President George H.W. Bush, who argued forcefully against her colleagues’ reasoning. Roth wrote that Kalshi’s registration as a designated contract market and its branding of wagers as sports-event contracts do not alter the fundamental nature of those products. “I see Kalshi’s actions as a performative sleight meant to obscure the reality that Kalshi’s products are sports gambling,” she wrote in her dissent.
Because this is a U.S. Appeals Court decision, it can only be challenged before the U.S. Supreme Court, unless the Third Circuit undertakes a rare en banc review in which all judges on the circuit collectively rehear the case. Kalshi did not immediately respond to a request for comment on the ruling. The company’s legal battle in New Jersey represents just one front in a broader national conflict over how prediction markets should be governed.
Courts across the country have reached sharply different conclusions on the question of jurisdiction. Nevada, for example, recently succeeded in temporarily banning Kalshi, and a state judge extended that initial 14-day ban by an additional two weeks on Friday. The patchwork of rulings underscores the deep disagreement between state and federal authorities over who holds regulatory authority over prediction market platforms.
The Trump administration has taken an assertive stance in favor of federal primacy on the issue. Last week, the Trump-era CFTC, alongside the Department of Justice, filed suit against Illinois, Arizona, and Connecticut for attempting to impose state-level regulations on prediction market platforms. Given the scale of the ongoing legal disagreements, analysts and legal observers expect the matter to ultimately be resolved by the Supreme Court.
Originally reported by Decrypt.
