TL;DR:
- Kalshi won a ruling from the Third Circuit Court of Appeals establishing that its sports markets are regulated by the federal CFTC, not by state authorities.
- In a 2-1 vote, the court overturned New Jersey’s cease-and-desist order, which had classified Kalshi’s contracts as unregistered sports bets.
- The ruling cannot be appealed except to the U.S. Supreme Court, strengthening the federal position in a jurisdictional conflict with national reach.
A federal appeals court based in Philadelphia issued a ruling in favor of Kalshi, the prediction markets platform. It determines that the State of New Jersey lacks authority to regulate it under its existing gaming laws.
The panel was composed of three judges and the vote was split 2 to 1. It determined that contracts linked to sporting events offered by the platform fall exclusively under the federal jurisdiction of the Commodity Futures Trading Commission (CFTC).
The ruling confirms a preliminary injunction granted last year, after New Jersey’s gaming regulators sent Kalshi a cease-and-desist order. State authorities argued that the platform’s sports markets were unregistered bets presented under a different name. The platform maintained, instead, that these are event contracts regulated exclusively at the federal level.
Federal Market Against State Regulators
The two judges who voted in favor of Kalshi were Chief Judge Michael A. Chagares, appointed to the Third Circuit by former President George W. Bush, and Judge David J. Porter, appointed by President Donald Trump. The dissenting judge, Jane R. Roth, appointed in 1991 by former President George H.W. Bush, sharply questioned her colleagues’ decision.
Roth argued that the platform‘s registration as a designated contract market and the use of the term “event contracts” do not alter the intrinsic nature of its products as bets on game outcomes. “I view Kalshi’s actions as a performative maneuver designed to obscure the reality that its products are sports gambling,” Roth wrote in her dissent.
Tarek Mansour, co-founder and CEO of the platform, celebrated the outcome: “The Third Circuit ruled in favor of Kalshi. People use prediction markets because they are fairer, more transparent, and reward being right,” he stated. “Free markets work. We should keep them that way.”
Kalshi Could Be Taken to the Supreme Court
The ruling, as a decision of the U.S. Court of Appeals, can only be appealed to the Supreme Court, unless the Third Circuit opts for an en banc review, an exceptional procedure in which all judges of the circuit would collectively reconsider the case.
Meanwhile, the jurisdictional conflict continues in other states: Nevada obtained a temporary ban on Kalshi, which was extended by two additional weeks, and the Trump administration, through the CFTC and the Department of Justice, sued Illinois, Arizona, and Connecticut last week for attempting to regulate prediction market platforms at the state level. The possibility that the Supreme Court will settle the debate definitively is becoming increasingly concrete.
