TLDR
- Federal appeals court delivered a 2-1 decision preventing New Jersey from applying gambling regulations to Kalshi’s platform
- Judges determined the Commodity Exchange Act at the federal level preempts state-level gambling restrictions for Kalshi’s event-based contracts
- The CFTC maintains it holds sole jurisdiction over these markets, categorizing event contracts as swaps under its authority
- Different federal circuits are producing contradictory decisions, with Third Circuit supporting Kalshi while Ninth Circuit backs Nevada’s position
- The CFTC filed lawsuits against Arizona, Connecticut, and Illinois recently to prevent state-level regulation of prediction platforms
A federal appellate court has prevented New Jersey regulators from closing down Kalshi’s sports-related prediction markets, determining that federal statutes supersede state-level 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 US Court of Appeals for the Third Circuit issued a 2-1 ruling supporting Kalshi, the event prediction platform. The panel determined that New Jersey’s gaming regulators lacked authority to pursue enforcement measures against the firm.
The judicial panel concluded that Kalshi’s event-based sports contracts fall under the jurisdiction of the federal Commodity Exchange Act. This federal statute prevents state gambling regulations from being applied to these contracts.
“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 panel further observed that the CFTC has neither determined Kalshi’s sports-related contracts violate public interest standards nor initiated any enforcement proceedings against the platform.
Tarek Mansour, Kalshi’s CEO, described the decision as “a big win for the industry and millions of users” in a statement posted on X.
In her dissenting opinion, Circuit Judge Jane Roth characterized Kalshi’s offerings as “sports gambling” and stated they are “virtually indistinguishable” from products available on conventional betting platforms. She referenced contracts involving NFL game outcomes, point spreads, and scoring totals as supporting evidence.
A Patchwork of Conflicting Court Rulings
State governments nationwide have initiated legal challenges and issued cease-and-desist directives targeting prediction market operators, including Kalshi and Polymarket. These states contend the platforms operate in violation of state gaming statutes.
Judicial outcomes have varied considerably. While Monday’s Third Circuit verdict supports Kalshi’s position, the Ninth Circuit refused last month to prevent Nevada from obtaining a restraining order against the identical company.
A Nevada district judge also prolonged a prohibition against Kalshi just days prior to Monday’s appellate decision. Another Ninth Circuit proceeding involving several companies is set for later this month.
CFTC Pushes Back Against State Regulators
Since assuming leadership, CFTC Chair Michael Selig has prioritized prediction markets as a key regulatory issue. He maintains the CFTC possesses “exclusive jurisdiction” over event-based contracts.
The previous week, the CFTC initiated lawsuits against Arizona, Connecticut, and Illinois to block what the agency characterized as unauthorized state attempts to regulate prediction market platforms.
During remarks at Vanderbilt University on Monday, Selig emphasized that the agency’s commodity definition is expansive, encompassing sports events, political outcomes, and traditional agricultural products like corn and grains without distinction.
The CFTC additionally submitted an amicus brief advancing its legal position in the Ninth Circuit before next week’s scheduled hearing.
The jurisdictional dispute between federal and state authorities over prediction market oversight continues, with numerous cases advancing through various court systems concurrently.
