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 New Jersey's argument that Kalshi's event contracts are not 'swaps' covered by the Act was unfounded, as it raised the bar beyond what the Commodity Exchange Act requires. The decision is a win for Kalshi, which has faced numerous state enforcement actions. However, the issue is not yet settled, as different courts have issued conflicting rulings, and further appeals are expected.
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.