Key Highlights
- A U.S. Court of Appeals has ruled in favor of prediction market platforms.
- Kalshi has been involved in the legal battle for about a year before this outcome.
- The decision may allow platforms to expand sports and event-based contracts.
The US Court of Appeals for the Third Circuit today ruled that the Commodity Futures Trading Commission (CFTC) holds exclusive jurisdiction over event contracts traded on Kalshi’s designated contract market.
In a 2-1 decision, the court upheld a lower court’s preliminary injunction, blocking New Jersey from enforcing its state gaming laws against Kalshi’s sports and event-based contracts traded on its CFTC-registered platform.
The ruling was issued in a KalshiEx LLC v. Flaherty et al. case, marking a notable development for the prediction markets industry.Â
CFTC chairman reacts to the ruling
CFTC Chairman Michael S. Selig described the ruling as a major victory for federal oversight of prediction markets.
In an X post on Monday, he welcomed the court’s decision, highlighting the agency’s exclusive regulatory jurisdiction over designated contract markets (DCMs).
Background of the case
Prediction markets allow users to trade contracts on the result of real-world events concerning elections, sports results, news developments, and others.
In early 2025, Kalshi started offering sports-related event contracts. However, the New Jersey Division of Gaming Enforcement (led by Mary Jo Flaherty and supported by the state Attorney General) viewed these offerings as unauthorized online sports betting.
In March last year, the state issued a cease-and-desist letter and ordered Kalshi not to offer these contracts to New Jersey residents, with claims that they violated the state’s Sports Wagering Act and the state’s constitution.
Kalshi challenged the order in federal court, arguing that its contracts are regulated by the federal Commodity Exchange Act (CEA). As Kashi functions as a CFTC-designated contract market (DCM), it claimed federal law preempts New Jersey’s state gaming rules.
A district court agreed and ordered a preliminary injunction, putting a stop to New Jersey’s enforcement. The state then appealed to the U.S. Court of Appeals for the Third Circuit, eventually leading to today’s verdict.
Impact on prediction markets
The decision offers greater legal security for CFTC-registered platforms functioning in the Third Circuit, including New Jersey, Pennsylvania, Delaware, and the U.S. Virgin Islands. To an extent, it eliminates the quick threat of state cease-and-desist orders or enforcement actions that have aimed at sports event contracts in various jurisdictions.
For the broader prediction markets industry, the ruling represents a step toward regulatory consistency, reinforcing the federal framework governing commodity derivatives.
What comes next
Kalshi and similar prediction market platforms may now expand sports and event contract offerings, having boosted confidence in key markets.
However, legal uncertainty remains. New Jersey may seek further review, including a potential appeal to the U.S. Supreme Court or an en banc review.
Future developments will likely depend on ongoing litigation in other jurisdictions, as well as potential rulemaking by the CFTC on event contracts.
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