Third Circuit Rules in Kalshi’s Favor
Kalshi scored a crucial win in the Third Circuit Court of Appeals on Monday. Kalshi came out on top in a 2-1 affirmation of its preliminary injunction against New Jersey.
New Jersey sent Kalshi a cease-and-desist letter in March 2025 over the exchange’s sports contracts. Kalshi sued New Jersey, arguing that as a federally regulated exchange, state gaming laws cannot interfere with the contracts it offers. Kalshi won its preliminary injunction in New Jersey, and New Jersey appealed.
The Third Circuit majority agreed with Kalshi, writing:
“New Jersey frames the issue broadly (regulating all sports gambling) rather than narrowly (regulating trading on federally designated contract markets). The text of the Act [Commodity Exchange Act] suggests that the narrow framing is the better reading. The Act preempts state laws that directly interfere with swaps traded on DCMs. Kalshi’s sports-related event contracts are swaps traded on a CFTC-licensed DCM, so the CFTC has exclusive jurisdiction.”
The focus of the New Jersey case on the definition of swaps made this a favorable case that Kalshi would likely win. However, cases in the Fourth, Sixth, or Ninth Circuits could go the way of the Third Circuit’s dissenting opinion.
Trading on sports remains gambling
The Third Circuit’s dissenting opinion was unconvinced that the federal government could preempt state law just because Kalshi’s sports products exist on a DCM. Judge Jane Roth argued that calling sports wagers sports contracts is “[an act] of alchemy that transmute[s] its products from sports gambling to futures trading.” She went on to argue that state gaming law has a place in limiting certain event contracts:
“When Congress gave the CFTC jurisdiction over swaps, there was no ‘clear and manifest purpose’ for federal law to supersede states’ ‘historic police powers’ over gambling regulation. After all, the CFTC has no expertise in the sports gaming industry. If Congress wanted the CFTC to serve as a kind of national sports gaming commission, it would not have stated its intention ‘in so cryptic a fashion.’”
While all the future Circuit rulings are uncertain, Roth represents the alternative view that could prevail in future rulings. The Supreme Court may have to resolve a split between Circuit judges.
Future Circuit arguments
Other Circuit courts have important deadlines coming up for the prediction market and gambling industries.
The Ninth Circuit will hear oral arguments for several prediction markets against Nevada on April 16. The Fourth Circuit will hear oral arguments on Kalshi’s appeal of its loss against Maryland. The oral argument is scheduled for May 2026.