A federal appellate court has sided with prediction market platform Kalshi in a dispute with New Jersey gaming authorities over sports event contracts. The US Court of Appeals for the Third Circuit issued a 2-1 ruling on Monday, finding that Kalshi had a reasonable chance of success in arguing that the Commodity Exchange Act preempts state law. The decision affirms a lower court ruling and sets the stage for a potential clash over gaming regulation at the US Supreme Court level.
The majority opinion, written by Circuit Judge David J. Porter, held that allowing New Jersey to enforce its gambling laws would obstruct the federal framework established by Congress when it created the Commodity Futures Trading Commission. Porter wrote that such state enforcement would prevent Kalshi, which operates a licensed designated contract market under the CFTC’s exclusive jurisdiction, from offering its sports-related event contracts in the state. He characterized the kind of state-level regulation at issue as precisely the fragmented approach Congress sought to eliminate.
Kalshi CEO Tarek Mansour welcomed the outcome, describing it on social media platform X as a significant victory for the industry and its millions of users. The company has consistently maintained that the CFTC holds exclusive authority over sports-related event contracts classified as swaps. That position has now received backing from a majority of the Third Circuit panel.
Circuit Judge Jane Roth dissented, arguing that Kalshi’s framing of its products amounted to a performative maneuver designed to obscure what she described as straightforward sports gambling. Roth wrote that the company’s event contracts were virtually indistinguishable from those offered on conventional betting websites. Her dissent reflects a broader debate about whether prediction markets represent a genuinely distinct financial product or a repackaged form of wagering.
The Third Circuit ruling arrives amid a wave of state-level actions targeting prediction markets. A Nevada judge recently extended a ban on Kalshi offering event-based contracts, and several other state authorities have moved to restrict sports betting on such platforms. The accumulating patchwork of conflicting rulings raises the possibility that the US Supreme Court could take up one of these cases, potentially revisiting its 2018 decision granting states authority to regulate sports gambling.
CFTC Chair Michael Selig, currently the agency’s sole commissioner following the December departure of acting chair Caroline Pham, has placed prediction markets at the center of the commission’s agenda. Over the past four months, Selig has publicly asserted the CFTC’s exclusive jurisdiction over event contracts, opened a proposed rule for public comment, and filed an amicus brief in the Ninth Circuit Court of Appeals in a related Nevada case. Last week, the regulator also sued Arizona, Connecticut, and Illinois to block what it characterized as unlawful state efforts to regulate prediction markets.
Speaking at the Digital Assets and Emerging Tech Policy Summit at Vanderbilt University on Monday, Selig emphasized the breadth of the CFTC’s statutory mandate. He stated that the agency’s definition of commodity covers sports events, political events, and agricultural products alike, and that the law does not treat event contracts on different underlying subjects differently. Selig also noted that exceptions exist for event contracts considered readily susceptible to manipulation.
Originally reported by CoinTelegraph.
