In a significant decision, a federal appeals court has ruled in favor of Kalshi, a prediction market provider, by blocking New Jersey's attempt to temporarily ban its operations. The Third Circuit Court of Appeals found that Kalshi's products fall under the federal Commodity Exchange Act, rather than state gambling laws.
The court stated that Kalshi had self-certified compliance with applicable laws and regulations, and the Commodity Futures Trading Commission (CFTC) had not determined that Kalshi's sports-related event contracts were contrary to the public interest. The ruling noted that the CFTC has not commenced any enforcement actions against sports-related event contracts. The decision is a significant win for Kalshi, which has been facing an onslaught of state enforcement actions.
However, the ruling may not be the final word, as different courts have issued divergent rulings on the issue. The CFTC has contended that prediction markets are swaps governed by the Commodity Exchange Act, which preempts state rules. The agency's chairman, Michael Selig, emphasized the importance of defending the CFTC's exclusive jurisdiction over these markets.
The case highlights the ongoing debate over the regulation of prediction markets and the jurisdiction of federal and state authorities.