Prediction Markets Firm Kalshi Wins Big Appeal Against New Jersey

A federal appeals court today ruled in Philadelphia that Kalshi can continue offering sports-related contracts in New Jersey in the latest prediction markets news. The Third Circuit issued a 2-1 decision favoring Kalshi, citing federal oversight by the Commodity Futures Trading Commission. The case followed a cease-and-desist order issued by New Jersey in March last year, leading to a legal challenge.

Prediction Markets- Kalshi’s Win

The ruling on Kalshi centers on prediction markets and whether federal law overrides state gaming restrictions. New Jersey argued it regulates all forms of sports gambling under its laws. However, the release, the court narrowed the issue to trading activity on federally designated contract markets.

According to the majority opinion, that distinction was decisive. Judges found that Kalshi’s contracts qualify as swaps under federal law. Therefore, the Commodity Futures Trading Commission holds exclusive jurisdiction over those trades.

Also, the court emphasized that the relevant statute preempts state laws interfering with such swaps. Kalshi operates a licensed designated contract market, placing its activities within federal control. As a result, state enforcement would conflict with that framework.

Court Defines Sports Contracts as Swaps

The panel further clarified how sports-related event contracts fit within existing prediction markets’ definitions. Judges stated that these contracts depend on outcomes tied to economic or financial consequences. Therefore, they meet the statutory needs required under federal commodities law.

Importantly, the court referenced the Act’s language directly. It noted that an event only needs a potential economic association to qualify. Even the dissent acknowledged that the prediction markets platform contracts align with this definition. 

Prediction markets have been facing increased scrutiny. As CoinGape reported, Kalshi Faces Class Action Over Iran War-Linked Bets. Additionally, the ruling indicated Kalshi’s compliance process. 

The company self-certified its contracts under applicable regulations. To date, the Commodity Futures Trading Commission has not rejected those offerings as contrary to public interest.

Injunction Upheld as Legal Battle Continues

However, the case also addressed procedural factors tied to the injunction. The court agreed that Kalshi demonstrated a likelihood of success on the merits. It also found the company would face irreparable harm without judicial relief.

As a result, the preliminary injunction against New Jersey remains in place. This prevents state regulators from enforcing gambling laws against Kalshi’s platform for now. This decision could be a win for prediction markets as they face increased scrutiny. The decision comes after Arizona charged Kalshi for operating an unlicensed gambling business in the state.

Meanwhile, the panel acknowledged broader tensions between federal and state authority. It stated that allowing state enforcement would create inconsistent regulatory outcomes. Congress designed the federal system to avoid such fragmentation.

The ruling is the first time a U.S. circuit court has addressed this prediction market issue directly. It follows mixed outcomes in lower courts across different jurisdictions. Oral arguments happened in September, where judges questioned the boundaries of qualifying swaps.