US Appeals Court Rules Federal Law Overrides State Gambling Rules for Kalshi Prediction Markets

TLDR

• A US appeals court ruled 2-1 that New Jersey cannot enforce its gambling laws against prediction market platform Kalshi
• The court found that the federal Commodity Exchange Act overrides state gambling laws for Kalshi’s sports-event contracts
• The CFTC claims exclusive jurisdiction over prediction markets, treating event contracts as swaps
• Courts across the US are issuing conflicting rulings, with the Third Circuit favoring Kalshi but the Ninth Circuit siding with Nevada
• The CFTC recently sued Arizona, Connecticut, and Illinois to block their attempts to regulate prediction markets

A federal appeals court has blocked New Jersey from shutting down Kalshi’s sports prediction markets, ruling that federal law takes priority over state gambling rules.

The US Court of Appeals for the Third Circuit voted 2-1 on Monday in favor of Kalshi, the prediction market platform. The court said New Jersey’s gaming authorities had no right to bring an enforcement action against the company.

The judges ruled that Kalshi’s sports-event contracts are covered by the federal Commodity Exchange Act. Because of this, state gambling laws cannot apply to them.

The court also noted that the CFTC has not found Kalshi’s sports contracts to be against the public interest, and has not taken any enforcement action against them.

Kalshi CEO Tarek Mansour called the ruling “a big win for the industry and millions of users” in a post on X.

Circuit Judge Jane Roth wrote a dissent, saying Kalshi’s products “are sports gambling” and are “virtually indistinguishable” from contracts found on regular betting websites. She pointed to contracts on NFL game winners, point spreads, and total scores as examples.

A Patchwork of Conflicting Court Rulings

States across the US have been filing lawsuits and cease-and-desist orders against prediction market platforms, including Kalshi and Polymarket. They argue these platforms violate state gambling laws.

The rulings have been inconsistent. The Third Circuit’s Monday decision favors Kalshi, but the Ninth Circuit declined last month to block Nevada from securing a restraining order against the same company.

A Nevada judge also extended a ban on Kalshi just days before Monday’s ruling. A new Ninth Circuit hearing involving multiple companies is scheduled for later this month.

CFTC Pushes Back Against State Regulators

CFTC Chair Michael Selig has made prediction markets a central focus since taking office. He has argued that the CFTC holds “exclusive jurisdiction” over event contracts.

Last week, the CFTC sued Arizona, Connecticut, and Illinois to stop what it called unlawful efforts by those states to regulate prediction markets.

Speaking at Vanderbilt University on Monday, Selig said the agency’s definition of a commodity is broad and covers sports events, political events, and traditional goods like corn and grains equally.

The CFTC also filed an amicus brief supporting its position in the Ninth Circuit ahead of next week’s hearing.

The conflict between state and federal regulators over prediction markets is ongoing, with multiple cases working through the courts simultaneously.

The post US Appeals Court Rules Federal Law Overrides State Gambling Rules for Kalshi Prediction Markets appeared first on CoinCentral.