A federal appeals court has handed Kalshi a significant victory, ruling that New Jersey cannot temporarily ban the prediction market provider. The Third Circuit Court of Appeals decided that Kalshi's products fall under the federal Commodity Exchange Act, rather than New Jersey's state gambling laws. The ruling, made by a 2-1 majority, stated that Kalshi had self-certified compliance with applicable laws and regulations, and that the Commodity Futures Trading Commission (CFTC) had not determined its sports-related event contracts to be contrary to the public interest.
The CFTC has not initiated any enforcement actions against sports-related event contracts, according to the ruling. New Jersey had argued that Kalshi's event contracts were not covered by the Act, but the court found this argument to be unfounded.
The ruling has implications for the ongoing debate over the regulation of prediction markets, with states across the US filing lawsuits and issuing cease-and-desist orders to providers like Kalshi and Polymarket. The CFTC has maintained that prediction markets are swaps governed by the Commodity Exchange Act, which preempts state rules. The decision comes as the Ninth Circuit is set to hear another case related to prediction markets, with the CFTC filing an amicus curiae brief in support of its exclusive jurisdiction over these markets.
CFTC Chairman Michael Selig emphasized the importance of defending the regulator's jurisdiction, citing the broad definition of commodities that includes events on sports, politics, and other areas.