Kalshi Scores Biggest Legal Win Yet in Appeals Court Decision Against New Jersey

In brief

• Kalshi won a major appeals court ruling that its sports-related markets should be federally regulated.
• The court said oversight belongs to the CFTC, not state gambling authorities like New Jersey’s.
• The decision strengthens Kalshi’s position in a broader national legal battle likely headed to the Supreme Court.

A federal appeals court in Philadelphia handed a significant victory to Kalshi Monday, ruling that New Jersey has no claim to regulate the prediction market under existing state gambling laws.

Wagers on Kalshi—including those related to sports—instead fall under the federal purview of the CFTC, a panel of federal appeals judges ruled 2-1 on Monday.

The appeals court affirmed a preliminary injunction granted last spring against New Jersey, after gambling regulators in the state sent Kalshi a cease-and-desist order. The state regulators had argued Kalshi’s sports-related markets were unregistered sports bets by another name; Kalshi argued they were event contracts exclusively regulated by the CFTC.

Last April, a federal judge in New Jersey sided with Kalshi, ruling New Jersey could not enforce a ban on the platform as the case proceeded to trial—becuase Kalshi was likely to succeed on the merits of its case.

Today, two appellate judges came to the same conclusion, affirming the judge’s original ruling. They are Chief Judge Michael A. Chagares, who was appointed to the Third Circuit Appeals Court by former President George W. Bush, and Judge David J. Porter, who was appointed by President Donald Trump.

The sole dissenting judge in today’s ruling, Jane R. Roth, lambasted her colleagues’ decision, arguing that although Kalshi’s sports-related wagers are registered as event contracts, that one factor does not change their inherent nature as bets on the outcomes of sports games.

“The Majority [holds] that Kalshi’s registration as a DCM and branding of its wagers as sports-event contracts are acts of alchemy that transmute its products from sports gambling to futures trading,” Roth dissented. “I see Kalshi’s actions as a performative sleight meant to obscure the reality that Kalshi’s products are sports gambling.”

Roth was appointed to the court in 1991 by former President George H.W. Bush.

Kalshi did not immediately respond to Decrypt’s request for comment on today’s ruling.

As a U.S. Appeals Court decision, today’s ruling can only be appealed to the U.S. Supreme Court—unless the 3rd Circuit opts for a rare en banc review, in which every judge on the circuit would collectively rehear the case.

For over a year now, state and federal courts across the country have come to vastly differing conclusions in the jurisdictional dispute over prediction market regulation. Nevada, for instance, recently succeeded in temporarily banning Kalshi in the gambling-dominated state. On Friday, a state judge extended that initial 14-day ban for another two weeks.

Meanwhile, the Trump administration has aggressively argued that prediction markets should not have to comply with state gambling laws. Last week, the Trump CFTC, along with the Department of Justice, sued Illinois, Arizona, and Connecticut for attempting to regulate prediction market platforms.

Due to the extent of the disagreement, the matter of prediction market regulation is likely to ultimately be decided by the Supreme Court.