A US federal appeals court rules New Jersey cannot block Kalshi users in the state from sports-related event contracts, finding CFTC has exclusive jurisdiction
ReutersNate Raymond
Context & Ripple Effects
This ruling sharpens a jurisdictional fight that has produced conflicting outcomes: Kalshi previously challenged Nevada gaming regulators over its sports and political contracts, while a Nevada judge later held its sports contracts subject to state gaming enforcement. A Massachusetts court also temporarily blocked access to Kalshi sports contracts for state residents, making the New Jersey appeals decision a significant federal-court counterweight.
The core issue is whether sports-linked event contracts are federally regulated derivatives or state-regulated gambling products. By assigning exclusive authority to the CFTC in this case, the decision gives Kalshi a stronger legal basis for a nationwide product model, even as the broader conflict remains unresolved.
First-order effects
New Jersey cannot enforce its state-level prohibition against Kalshi users participating in the covered sports-related event contracts; Kalshi can continue serving those users under the court’s reading of CFTC authority.
The decision directly weakens the New Jersey regulator’s ability to treat these contracts as locally governed sports wagering, while elevating the CFTC’s role as the relevant overseer for this product category.
Second-order effects
Kalshi gains a more useful precedent in disputes with other state gaming regulators, particularly against the backdrop of the Nevada ruling favoring state gaming enforcement and the Massachusetts injunction.
State regulators and competing betting operators have greater incentive to press for appellate review or clearer federal rules, because the applicable regulator now determines whether platforms face a state-by-state access regime or a federally centered one.
Third-order effects
If this reasoning is sustained across courts, prediction-market platforms could increasingly package sports and other real-world outcomes as CFTC-regulated contracts rather than seek authorization market by market under gaming law.
The conflicting decisions point to a likely need for higher-court or congressional clarification: the durable question is not merely Kalshi’s access in one state, but where the boundary between derivatives regulation and gambling regulation sits.
The trend: This is one data point in prediction-market platformization, where platforms are testing whether federal market regulation can support national distribution of contracts that resemble state-regulated wagering.
The Third Circuit ruled in Kalshi's favor. People use prediction markets because they're more fair, transparent, and reward being right. Free markets work. We should keep them that way. This is a big win for the industry and millions of users. [image]
Kalshi scores its biggest win yet: a split appellate decision holding that sports event contracts (85% of its business) likely fall under federal jurisdiction, noting the CFTC has authority to stop those contracts but hasn't. The dissent called them “virtually indistinguishable […
One of the many challenges in this case: The Dodd-Frank Act amended the CEA to give the CFTC **discretionary power** to review and prohibit certain types of contracts, including ... Gaming. The CFTC exercised this discretion to write Rule 40.11(a)(1), which created a
I've said it multiple times already, no matter what side you're on in the Prediction Markets debate the law is clear. CEA (especially its Dodd-Frank changes) make clear the CFTC's regulatory authority, and anyone arguing otherwise is doing so at the behest of the gambling lobby.
Huge win for @Kalshi (and all PMs) in the 3rd Circuit. This is the first appellate ct to weigh in and sets important precedent for related litigation. Key takeaways: 1)CFTC has exclusive jurisdiction over swaps 2)Sports event contracts are swaps 3)Enforcing state gambling laws [i…
Judge Roth dissent: “I would also hold that conflict preemption does not apply because Kalshi is not precluded from complying with both New Jersey and federal law, and because New Jersey's regulations do not undermine the congressional objectives behind the Act.” [image]
Judge Roth dissent: “I see Kalshi's actions as a performative sleight meant to obscure the reality that Kalshi's products are sports gambling. Because Kalshi is facilitating gambling, it can be subjected to state regulation.” [image]
Judge Roth dissent: “These offerings are virtually indistinguishable from the betting products available on online sportsbooks, such as DraftKings and FanDuel.” [image]