A federal appeals court has handed prediction market provider Kalshi a significant victory, ruling that New Jersey cannot temporarily ban the platform due to the federal Commodity Exchange Act taking precedence over state gambling laws. The Third Circuit Court of Appeals made this decision in a 2-1 vote, stating that Kalshi's products fall under federal law rather than New Jersey state laws.
The ruling emphasized that Kalshi had self-certified compliance with applicable laws and regulations, and the Commodity Futures Trading Commission (CFTC) had not determined the company's sports-related event contracts to be against the public interest. This decision comes as states across the US have been filing lawsuits and issuing cease-and-desist orders against prediction market providers like Kalshi, alleging violations of state gambling laws. The CFTC has argued that prediction markets are swaps governed by the Commodity Exchange Act, which preempts state rules.
The ruling highlights the ongoing legal battle between states and prediction market providers, with different courts issuing varying decisions. CFTC Chairman Michael Selig has stressed the importance of defending the federal regulator's exclusive jurisdiction over these markets, with the CFTC filing an amicus curiae brief in support of this stance.