In a significant victory for Kalshi, a federal appeals court has ruled that New Jersey cannot temporarily ban the company's sports-related event contracts, marking a win against the state's enforcement actions. The Third Circuit Court of Appeals determined that Kalshi's products are subject to the federal Commodity Exchange Act, which supersedes New Jersey's state gambling laws. The ruling stated 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 court rejected New Jersey's argument that Kalshi's event contracts did not qualify as 'swaps' under the Act, as the state's proposed requirements were deemed too stringent.
The decision comes as states across the US have been filing lawsuits and issuing cease-and-desist orders against prediction market providers, including Kalshi and Polymarket, alleging violations of state gambling laws. The CFTC has maintained that prediction markets are swaps governed by the Commodity Exchange Act, which preempts state rules. The ruling has significant implications for the industry, with appeals courts issuing mixed decisions on the matter.
CFTC Chairman Michael Selig emphasized the importance of defending the regulator's exclusive jurisdiction over these markets, stating that the definition of commodity and statute is broad and inclusive of various events, including sports and politics.