Kalshi Wins Major Victory For Prediction Markets Over New Jersey In Federal Appeals Court

By Bill Speros

Apr 6th, 2026 11:59 AM EDT

Kalshi scored a major victory over New Jersey gaming regulators Monday. The Third U.S. Circuit Court of Appeals ruled 2-1 ruled that the state cannot prevent the prediction market platform from offering sports-based trading contracts. This decision could eventually help clear a legal logjam nationwide.

The Third U.S. Circuit Court of Appeals, seated in Philadelphia, found that the Commodity Exchange Act (CEA) governs these contracts, preempting state gambling laws concerning sports betting.

"I might go for a ride at the jersey shore today," Kalshi co-founder Luana Lopes Lara posted on X after the decision was released. Her post was subsequently deleted, then reposted.

Kalshi's other co-founder, Tarek Mansour, in the interim, added the following on X:

The Third Circuit ruled in Kalshi’s favor. People use prediction markets because they’re more fair, transparent, and reward being right. Free markets work. We should keep them that way. This is a big win for the industry and millions of users.

In January of 2025, Kalshi self-certified sports-event contracts. At the time, the Commodity Futures Trading Commission (CFTC) had yet to determine if those contracts were allowed. Two month later, in March, New Jersey gaming regulators issued a blunt order: Kalshi had to stop offering its sports prediction market contracts in the state.

The state argued that Kalshi's "contracts" were no different that sports wagers. Sports betting remains a tightly controlled industry, governed by state law and generating hundreds of millions in tax revenue. Kalshi disagreed.

The company argued that operates as a Designated Contract Market and its contracts remain financial instruments regulated by the CFTC.

State-By-State Framework Remains In Place

Kalshi remains in court against multiple states. In Ohio and Nevada, state-level rulings have gone the other direction, with courts and regulators siding with the view that state gambling laws can and should govern these products. A temporary restraining order issued by a Massachusetts judge remains under appear.

The result is a fractured, state-by-state patchwork that leaves Kalshi — and the entire prediction market space — in legal limbo across much of the country.The case, formally known as Kalshiex LLC v. Mary Jo Flaherty, et al (25-1922), became one of the most closely watched legal battles in the burgeoning world of prediction markets. At its core, the dispute asked a deceptively simple question: when a federal agency already regulates a financial product, can a state still call it illegal gambling?

The court Monday wrote

We agree with the District Court that Kalshi has shown likelihood of success on its
argument that the CFTC’s exclusive jurisdiction over DCMs
preempts New Jersey gambling laws and the state constitution,
we conclude that the public interest factors tip toward Kalshi.

---

Court Finds Federal Law Preempts New Jersey Statues

Monday, the Third Circuit answered that question with a resounding — if not unanimous — no.

The majority opinion found that the CEA preempts New Jersey's gambling statutes when it comes to CFTC-regulated contracts. In plain terms, because the federal government had already staked its claim over Kalshi's products, the state couldn't simply override that authority by slapping a "gambling" label on them. The court leaning into the basic architecture of American federalism — the question of who gets to regulate what.

For Kalshi, the ruling delivers both a legal victory and public validation. The company has long insisted that its platform operates in a different universe from traditional sportsbooks. Rather than placing a bet on a team to win, users on Kalshi trade contracts tied to real-world outcomes — elections, economic indicators, and yes, sporting events. The company frames it as forecasting, not gambling.

After Monday, at least one federal court agreed.

Case Headed For Supreme Court?

But the story is far from over. New Jersey will all but certainly appeal the case, seeking cert in front of the Supreme Court. The dissenting judge in the 2-1 ruling signaled that the legal question remains close, and the broader war continues on multiple fronts.

The stakes extend well beyond one company. A definitive federal resolution could reshape how Americans engage with both financial markets and sports. It could challenge the dominance of legacy sportsbooks, disrupt state gambling tax revenues, and force Congress or the Supreme Court to draw clearer lines between commodity trading and wagering.

The Third Circuit drew a small but consequential line: federal law governs the future of prediction markets. Whether the rest of the country follows that line remains the next great question in this unfolding saga.

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