Kalshi, a leader in the rapidly growing prediction market industry, has won a significant legal battle in New Jersey. A federal appeals court ruled that the prediction market can continue to offer sports event contracts in the state, as it falls under the purview of the Commodity Futures Trading Commission (CFTC) rather than local gambling regulations.

The decision comes after a prolonged legal tussle between Kalshi and New Jersey regulators, who had previously sent the company a cease-and-desist order in March 2025. The New Jersey Division of Gaming Enforcement (DGE) had argued that Kalshi’s sports-related event contracts violated the state’s gambling laws, including restrictions on wagering on in-state college sports.

Court Ruling Grants Kalshi Temporary Relief

The U.S. Court of Appeals for the Third Circuit ruled 2-1 in favor of Kalshi, affirming a lower court’s decision to grant the company a preliminary injunction. The majority of the court held that Kalshi’s sports event contracts, which are traded on a CFTC-licensed exchange, fall under federal jurisdiction, preempting state gambling laws.

“Kalshi has met its burden for preliminary injunctive relief,” wrote Judge David J. Porter, explaining that New Jersey’s broader approach to regulating all forms of sports gambling clashed with the more narrowly defined federal regulations governing trading on designated contract markets (DCMs).

The court emphasized that sports-related contracts, like those offered by Kalshi, are considered swaps under the CEA, and therefore regulated by the CFTC. This decision allows Kalshi to continue operating in New Jersey without obtaining a sports betting license, at least temporarily.

However, not all judges agreed with the decision. Judge Jane Roth dissented, drawing parallels between Kalshi’s contracts and sports betting products available through online sportsbooks like DraftKings and FanDuel. Roth argued that the prediction contracts were essentially indistinguishable from sports betting and should be subject to state regulation.

Despite this dissent, the majority opinion prevailed, and Kalshi can continue to offer its products in New Jersey. The state now faces the possibility of appealing to the U.S. Supreme Court or requesting an en banc hearing in the Third Circuit, which would involve all the court’s active judges.

Kalshi Faces Legal Challenges in Other States

While Kalshi scored a victory in New Jersey, its legal struggles continue in other states. The company is facing lawsuits in several jurisdictions, including Massachusetts, Arizona, and Nevada. Arizona has even filed criminal charges against Kalshi, marking the first such action against the company.

As ESPN reports, the Commodity Futures Trading Commission (CFTC) has weighed in on these state-level disputes, filing lawsuits in federal courts against Arizona, Connecticut, and Illinois. The CFTC argues that state actions to regulate prediction markets interfere with its authority and the federal framework governing such contracts.

In Nevada, Kalshi has been temporarily banned from offering sports event contracts while the Nevada Gaming Control Board seeks a preliminary injunction. The CFTC has also filed its own lawsuit in the state to challenge the board’s decision.

The ongoing legal battles highlight the growing tension between state and federal regulation of prediction markets. Kalshi’s legal team maintains that their products are not sports bets but rather financial instruments subject to the CFTC’s oversight. This distinction has become central to the debate, as state regulators argue that prediction markets are simply a new form of illegal gambling.

For Kalshi, the New Jersey ruling represents a crucial win, but the broader legal landscape remains uncertain. The company’s ability to continue offering its services in the U.S. will depend on the outcome of ongoing litigation in other states and the federal government’s stance on prediction markets.

Kalshi’s success in New Jersey, however, may set a precedent for other prediction market companies seeking to operate in states with stringent gambling laws. The legal battles are far from over, but the company’s continued legal victories may pave the way for a more uniform regulatory approach in the future.