In a significant ruling, a US appeals court has determined that New Jersey does not have the authority to temporarily ban the operation of prediction market provider Kalshi. The Third Circuit Court of Appeals found that the federal Commodity Exchange Act takes precedence over state gambling laws, thereby allowing Kalshi to continue offering its sports-related event contracts.
The ruling, which was decided by a 2-1 vote, stated that Kalshi's products are subject to federal law and that the company had self-certified compliance with applicable laws and regulations. The Commodity Futures Trading Commission (CFTC) has not initiated any enforcement actions against Kalshi's sports-related event contracts, and the court ruled that New Jersey's argument that these contracts are not covered by the Act is without merit. The decision is a major victory for Kalshi, which has been facing numerous state enforcement actions. However, the ruling may not be the final word on the matter, as different courts have issued conflicting decisions on the issue.
The CFTC has maintained that prediction markets are governed by the Commodity Exchange Act, which preempts state rules. The agency's chairman, Michael Selig, has emphasized the importance of defending the CFTC's exclusive jurisdiction over these markets. With the Ninth Circuit set to hear another case on the matter later this month, the issue is likely to remain a contentious one.