Kalshi has achieved a significant legal win in New Jersey, securing the first federal appellate ruling on sports event contracts just days after facing a setback in Nevada.
Third Circuit upheld a District Court’s injunction preventing New Jersey from enforcing its gambling laws against Kalshi’s prediction market platform. This is the first case where a federal appellate court has addressed whether state sports betting regulations apply to prediction markets.
Central to this case are two questions. First, does the Commodity Exchange Act (the CEA) supersede state gambling laws. Second, are Kalshi’s event contracts “swaps” under the CEA and therefore subject to federal regulation.
Kalshi contends that its contracts fall within the jurisdiction of federal law and that all relevant state authorities agree that Kalshi’s event contracts are virtually identical to existing forms of gambling.
A recent state court in Nevada has issued an order prohibiting Kalshi from offering any of its sports-related event contracts, which suggests that courts are interpreting this situation in different ways across state lines; thus increasing the likelihood that the U.S. Supreme Court will ultimately intervene in this matter.
Three judges from the Third Circuit Court of Appeals Chief Judge Michael A. Chagares; Judge David J. Porter; and Judge Jane Richards Roth heard this appeal. Judges Chagares and Porter ruled in favor of Kalshi, while Judge Roth dissented.
In her dissent, Judge Roth argued that Kalshi’s products closely resemble sportsbook offerings from companies like DraftKings and FanDuel. She also warned against assuming that federal law should override state authority in regulating gambling, an area traditionally governed at the state level.
The case also carries financial implications, as state governments rely heavily on gambling-related tax revenues. Losing jurisdiction over prediction markets could result in reduced income for state budgets.
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