Prediction markets win big! Court rules: New Jersey has “no authority to ban” Kalshi from launching sports event contracts

The U.S. federal appeals court issued a key ruling on Monday, finding that the state of New Jersey does not have the authority to bar sports wagering contracts from being launched by prediction market platforms that are not subject to oversight by the Commodity Futures Trading Commission (CFTC), a victory seen as a major win for Kalshi and for the broader prediction market landscape. The U.S. Third Circuit Court of Appeals, consisting of a three-judge panel, issued its decision on Monday by a 2-1 vote, explicitly stating that New Jersey’s gaming regulators lack the power to prevent the prediction market platform Kalshi from launching sports event contracts in that state. Federal oversight trumps local authority—the court calls out New Jersey The fight between the two sides began last year. At the time, New Jersey and other states barred Kalshi from offering sports event contracts on the grounds of “violating local gaming regulations.” Unwilling to back down, Kalshi immediately sued the state governments, arguing that the platform is a federally regulated commodity exchange and qualifies as a “designated contract market (DCM),” so the Commodity Exchange Act should take precedence over state law, meaning the state governments have no right to intervene. In the course of the lawsuit, New Jersey tried to cling tightly to the savings clause in the statute, insisting that the state government retains jurisdiction over these types of contracts. However, the judges rejected that position in their opinion: The wording of the statute is very clear—federal law has explicitly granted the CFTC exclusive jurisdiction over swaps. CFTC throws its support behind prediction markets In fact, as a federal regulator, the CFTC has long been a strong backer of prediction markets. To defend “exclusive jurisdiction,” last week the CFTC even took major action by suing the governments of Arizona, Illinois, and Connecticut, accusing them of attempting to unlawfully shut down federally regulated DCM platforms. The appeals court also agreed with the CFTC’s position. The opinion states: “Congress has fully entrusted DCM platform trading jurisdiction to the CFTC while preserving state governments’ authority to regulate trading ‘outside’ DCM platforms. Even if these event contracts have a gaming element, the final discretion to review or prohibit them still rests with the CFTC.” However, the judge who cast the dissenting vote believed that Kalshi was “pulling the wool over people’s eyes,” using tricks, and trying to obscure the fact that the very nature of its product is sports wagering. The judge emphasized: “If Kalshi is facilitating wagering conduct, then it follows that it should be subject to regulation by the state government.” After receiving the favorable ruling, Kalshi CEO Tarek Mansour immediately took to the social platform X to proclaim that this was a “major victory.” He said: People are drawn to prediction markets because they’re fairer, more transparent, and can provide tangible rewards to those who ‘get the direction right.’ The free-market mechanism works—we should let it stay that way. Wall Street’s take: a temporary win, but the final call still awaits the Supreme Court However, Jaret Seiberg, managing director of the Washington Research Group at the investment bank TD Cowen, noted that for Kalshi, this ruling is, at best, a “temporary victory.” Ultimately, who has jurisdiction over sports events still must be decided by the Supreme Court, and the process could take years. Jaret Seiberg said: “We believe that to have this dispute truly placed on the docket of the Supreme Court justices, we’ll likely have to wait another year.” As we said earlier, we still lean more toward the state governments prevailing, because—based on historical context—the gaming industry has always been regulated by the states themselves. We believe this will have a key impact on the Supreme Court’s majority of justices. Are prediction markets crossing the line? Washington State sues Kalshi for violating gambling laws, as regulatory clashes across U.S. states heat up