A federal appeals court has ruled that New Jersey regulators cannot block Kalshi from offering its prediction market services in the state, marking a significant development in the legal battle over the regulation of event-based trading.
The 3rd U.S. Circuit Court of Appeals determined that oversight of Kalshi’s contracts falls under the exclusive jurisdiction of the Commodity Futures Trading Commission (CFTC), rather than state gaming authorities.
Kalshi allows users to trade contracts tied to real-world outcomes, including sports and political events. While states like New Jersey argue these resemble gambling and should be subject to local laws, Kalshi maintains that its products qualify as financial derivatives regulated at the federal level.
The court’s 2–1 decision sided with Kalshi, affirming that its event contracts are legally classified as “swaps” traded on a CFTC-approved platform. This classification effectively preempts state-level restrictions under existing federal law.
The ruling represents a key precedent in an ongoing nationwide dispute, as multiple states attempt to regulate or restrict prediction markets. Some courts have issued conflicting decisions, and further legal challenges are expected.
New Jersey officials have indicated they are reviewing their options, which could include seeking a rehearing. Meanwhile, the case underscores the growing tension between traditional gambling regulation frameworks and emerging financial-style betting platforms.