Key Takeaways
- The Third Circuit affirmed an injunction blocking New Jersey from enforcing its gambling laws against Kalshi’s sports-related event contracts.
- The court said Kalshi had shown a reasonable likelihood that the contracts fit the Commodity Exchange Act’s definition of swaps and fall under the CFTC’s exclusive jurisdiction when traded on a licensed designated contract market.
- The 2-1 ruling gives Kalshi its first appellate win in a fight that could shape similar disputes across other states.
A federal appeals court has handed Kalshi a major win in its fight with state gaming regulators, ruling that New Jersey cannot enforce its gambling laws against the company’s sports-related event contracts while the case moves forward.
In a decision issued April 6, the U.S. Court of Appeals for the Third Circuit affirmed a preliminary injunction after finding that Kalshi showed a reasonable chance of success on its argument that the Commodity Exchange Act preempts New Jersey law in this context.
The panel said Kalshi operates a CFTC-licensed designated contract market, or DCM, and that its sports-related event contracts fall within the Act’s definition of swaps because they depend on event outcomes associated with a potential financial, economic, or commercial consequence.
Court Grounds Decision in Federal Market Oversight
The Third Circuit said the Commodity Exchange Act gives the CFTC exclusive authority over swaps traded on designated contract markets and found that New Jersey’s enforcement effort likely runs into federal preemption.
The opinion also leaned heavily on Congress’s decision to place derivatives trading inside a national regulatory framework.
The court said allowing New Jersey to apply its gambling laws against Kalshi would interfere with that structure by preventing a federally regulated market from offering the contracts in the state.
That point sits at the center of the ruling. The panel said state enforcement would create the kind of fragmented regime Congress sought to eliminate when it gave the CFTC authority over this area.
Why the Contracts Qualified as Swaps
New Jersey argued that sports outcomes sit too far from traditional financial instruments to qualify as swaps.
The court rejected that view and said the statute requires only that the event be associated with a potential financial, economic, or commercial consequence.
The panel concluded that sports outcomes clear that threshold, pointing to effects on sponsors, advertisers, broadcasters, franchises and surrounding communities.
The ruling also noted that Kalshi self-certified the contracts as compliant with applicable law and that the CFTC has not found them contrary to the public interest.
That helped strengthen Kalshi’s position at this stage of the case.
Dissent Keeps the Broader Debate Alive
The panel split 2–1 in its ruling.
In dissent, Judge Jane Roth said Kalshi’s contracts were virtually indistinguishable from sportsbook offerings.
Roth argued that New Jersey should still be able to enforce its gambling laws.
That split shows the legal fight is far from settled.
The majority treated the case as one about trading on a federally regulated derivatives venue. ‘
The dissent viewed the contracts as sports betting by another name.
Broader Implications for Prediction Markets
The decision is the first federal appellate ruling to back Kalshi’s position in the growing fight over sports-event contracts.
That gives the company a stronger precedent as related disputes continue in other states.
It also lands as the CFTC reopens the broader policy debate around prediction markets.
In March, the agency opened public comment on event contracts, including whether some should be barred as contrary to the public interest. Comments are due by April 30, 2026.
The practical result is clear: New Jersey remains blocked from applying its gambling laws to Kalshi’s sports-related event contracts while the litigation continues.
The larger question of how far prediction markets can go under federal commodities law is still being worked out in court and at the agency level.
PhD, researcher and writer exploring AI, blockchain, and the philosophy of tech, with a focus on DeScAI, governance, and trust.
