In a significant victory for Kalshi, a federal appeals court has barred New Jersey from temporarily banning the platform, citing that its products fall under the federal Commodity Exchange Act rather than state laws. The ruling, made by a 2-1 majority, states that Kalshi's sports-related event contracts are presumptively approved under federal law, as the company has self-certified compliance with applicable laws and regulations.
The Commodity Futures Trading Commission (CFTC) has not determined that Kalshi's contracts are against the public interest. The court rejected New Jersey's argument that Kalshi's event contracts do not qualify as 'swaps' under the Act, as the outcome of a sports game is not directly connected to a financial instrument. However, Circuit Judge Jane Roth dissented, arguing that New Jersey's rules do not undermine the objectives of the Commodity Exchange Act and that Kalshi's products constitute sports gambling. The ruling is part of a broader trend of states filing lawsuits against prediction market providers, with the CFTC contending that these markets are governed by federal law.
While the ruling favors Kalshi, different courts have issued conflicting decisions, and the issue is expected to continue in other jurisdictions.