Kalshi secured a significant legal victory after the U.S. Court of Appeals for the Third Circuit ruled 2–1 to uphold an injunction blocking New Jersey from enforcing its gambling laws against the prediction market platform.
The decision marks the first time a federal appellate court has ruled on whether state sports betting laws apply to prediction markets, and comes days after Kalshi suffered a setback in Nevada, underscoring growing legal divergence across jurisdictions that could ultimately require resolution by the U.S. Supreme Court.
At the heart of the case were two key questions: whether the federal Commodity Exchange Act (CEA) preempts state gambling laws, and whether Kalshi’s contracts qualify as “swaps” under the statute. Kalshi needed to prevail on both issues to succeed.
Writing for the majority, Judge David J. Porter said the federal law overrides state regulation in this context. “The District Court considered whether the Act impliedly preempted state regulation of DCMs and concluded that ‘at the very least field preemption applies,’” he wrote.
The court determined that the relevant field is trading on a designated contract market (DCM), rather than gambling more broadly, and found that federal law occupies that space. It also concluded that conflict preemption applies, meaning New Jersey’s enforcement would interfere with federal objectives.
“Allowing New Jersey to enforce its gambling laws and state constitution would create an obstacle to executing the Act because such state enforcement would prohibit Kalshi, which operates a licensed DCM under the exclusive jurisdiction of the Commodity Futures Trading Commission (CFTC), from offering its sports-related event contracts in New Jersey,” Porter wrote. “This state regulation is exactly the patchwork that Congress replaced wholecloth by creating the CFTC.”
On the second issue, the court emphasised the broad definition of swaps under the CEA, rejecting New Jersey’s argument that such contracts must be directly tied to financial instruments.
“New Jersey argues that Kalshi’s event contracts are not ‘swaps’ covered by the Act ‘because the outcome of a sports game is not “joined or connected” with a financial, economic, or commercial instrument or measure,’” Porter wrote. “But its proposed ‘joined or connected’ requirement raises the bar beyond what the Act requires.”
In a dissent, Judge Jane Richards Roth argued that Kalshi’s offerings closely resemble traditional sports betting and should fall under state oversight.
“Offerings are virtually indistinguishable from the betting products available on online sportsbooks, such as DraftKings and FanDuel,” she wrote. “I see Kalshi’s actions as a performative sleight meant to obscure the reality that Kalshi’s products are sports gambling,” adding, “Because Kalshi is facilitating gambling, it can be subjected to state regulation.”
Roth also cautioned against broadly applying federal preemption in an area historically regulated by states, writing that “DCM trading is not the sort of comprehensive field where the federal interest is so dominant that Congress intended for the ‘complete ouster of state power.’”
The ruling comes less than 72 hours after a Nevada state court extended a ban on Kalshi’s contracts, including sports-related offerings, highlighting the unsettled legal landscape.
In that case, Judge Jason Woodbury said: “I find based on the arguments that have been presented that it is a gaming activity that is prohibited for any non-licensee to engage in.”
Representing Nevada, lawyer Jessica Whelan told the court: “There’s no real dispute that Kalshi is not in compliance with Nevada gaming regulations. Kalshi’s primary argument is that it does not need to comply with Nevada wagering law.”
The conflicting outcomes in New Jersey and Nevada point to a broader legal clash over how prediction markets should be regulated in the United States, with courts divided on the reach of federal commodities law versus state gambling authority.
Original article: https://www.yogonet.com/international/news/2026/04/07/118450-kalshi-wins-new-jersey-appeal-in-first-federal-ruling-on-sports-event-contracts
