Appeals Court Halts New Jersey's Attempt to Shut Down Kalshi's Sports Markets

A federal appeals court has ruled that New Jersey cannot temporarily ban prediction market provider Kalshi, delivering a key legal victory for the platform amid a wave of state-level enforcement actions. The Third Circuit Court of Appeals, in a 2-1 decision, determined that Kalshi's sports-related event contracts are governed by the federal Commodity Exchange Act, not New Jersey state gambling laws. The ruling emphasized that Kalshi self-certified compliance with federal regulations, and the Commodity Futures Trading Commission (CFTC) has not taken action against its sports contracts.\n\nThe court rejected New Jersey's argument that Kalshi's contracts are not 'swaps' under the Commodity Exchange Act, noting that the state's proposed criteria exceed the requirements of federal law. Dissenting Judge Jane Roth argued that the products on Kalshi's platform constitute 'sports gambling,' citing examples such as contracts betting on NFL game outcomes and point spreads.\n\nThis decision adds to a patchwork of rulings across U.S. courts regarding the legal status of prediction markets. While the Third Circuit's ruling supports the CFTC's stance that these markets are federally regulated, the Ninth Circuit recently allowed Nevada to proceed with a temporary restraining order against Kalshi. The CFTC has defended its position that event contracts are swaps under the Commodity Exchange Act, with Chairman Michael Selig emphasizing the need for federal oversight.\n\nKalshi and other prediction market platforms have faced increasing scrutiny from states, which argue that their contracts violate local gambling laws. The outcome of upcoming court hearings, including one in the Ninth Circuit later this month, will likely shape the future regulatory landscape for these markets.\n\nCFTC's involvement in the case highlights the agency's push to assert exclusive jurisdiction over event contracts, which it views as part of the broader commodity derivatives market. The agency filed an amicus curiae brief in support of its position ahead of a hearing next week.\n\nAs the legal battle continues, the decision by the Third Circuit could embolden prediction market providers to expand their offerings, while states may seek to challenge these rulings in higher courts or through legislative action.