A significant court ruling has given Kalshi, a prediction market platform, a crucial victory against a wave of state-led enforcement actions. The Third Circuit Court of Appeals decided that New Jersey cannot temporarily ban Kalshi, citing that the company's offerings are subject to the federal Commodity Exchange Act rather than the state's gambling laws.
The court's majority opinion emphasized that Kalshi had self-certified compliance with applicable laws and regulations, and since the Commodity Futures Trading Commission (CFTC) has not determined Kalshi's sports-related event contracts to be contrary to the public interest, they are presumptively approved under federal law. The ruling highlights the ongoing legal debate between states and federal regulators over the jurisdiction of prediction markets and event contracts, with implications for companies like Kalshi and Polymarket. While some courts have issued rulings in favor of states, others, like the Third Circuit, have found in favor of the federal preemption argument, leading to a mixed legal landscape that continues to evolve.