In a significant victory for Kalshi, a federal appeals court has ruled that New Jersey cannot temporarily ban the company's sports-related markets. The Third Circuit Court of Appeals decided that Kalshi's products fall under the federal Commodity Exchange Act, rather than state gambling laws. The court found that Kalshi had self-certified compliance with applicable laws and regulations, and the Commodity Futures Trading Commission (CFTC) had not determined that the company's sports-related event contracts were against the public interest.
The ruling stated that the CFTC has not commenced any enforcement actions against sports-related event contracts. New Jersey had argued that Kalshi's event contracts were not covered by the Act, but the court disagreed, saying that the state's proposed requirements went beyond what the Act demands. The decision comes as states across the US have been filing lawsuits or issuing cease-and-desist orders to prediction market providers, alleging that their sports-related contracts violate state gambling laws.
The CFTC has maintained that prediction markets are swaps governed by the Commodity Exchange Act, which preempts state rules. The ruling may have implications for the ongoing debate over the regulation of prediction markets, with different courts issuing conflicting decisions.
The CFTC Chairman has emphasized the importance of defending the regulator's exclusive jurisdiction over these markets.