In a pivotal decision, a federal appeals court in Philadelphia declared that New Jersey lacks authority under its gambling laws to regulate Kalshi’s prediction market. The ruling clarified that the wagers on Kalshi, including those tied to sports events, are governed by the federal Commodity Futures Trading Commission (CFTC). A 2-1 panel of judges affirmed this stance on Monday.
The court upheld a preliminary injunction from last spring against New Jersey’s gambling regulators, who had issued a cease-and-desist order to Kalshi. The state argued that sports-related markets offered by Kalshi were essentially unregistered sports bets, while Kalshi maintained they fell under the exclusive regulation of the CFTC.
Earlier in April, a federal judge in New Jersey ruled in favor of Kalshi, stating that the state could not enforce a ban on the platform during trial proceedings, as Kalshi was likely to succeed on its claims. This decision was reaffirmed by two appellate judges today: Chief Judge Michael A. Chagares, appointed by George W. Bush, and Judge David J. Porter, appointed by Donald Trump.
The dissenting opinion came from Judge Jane R. Roth, who criticized her colleagues for what she deemed a misinterpretation of Kalshi’s sports-related wagers as event contracts rather than bets on sporting outcomes. “The Majority believes that Kalshi’s registration and branding transform its products from sports gambling to futures trading,” wrote Roth, appointed by George H.W. Bush in 1991.
Kalshi has yet to respond to a request for comment on the ruling.
This decision can be appealed further only to the U.S. Supreme Court unless the entire Third Circuit opts for an en banc review. The legal landscape regarding prediction market regulation remains fragmented, with states like Nevada achieving temporary bans against Kalshi and the Trump administration advocating that such markets should not adhere to state gambling laws. Recently, a lawsuit was filed by the CFTC and the Department of Justice against Illinois, Arizona, and Connecticut for their attempts to regulate these platforms.
Given the significant disagreements across jurisdictions, it is probable that the Supreme Court will ultimately decide on the issue.