A federal appeals court has ruled that New Jersey regulators cannot block sports-linked contracts offered by Kalshi, handing the company a defining win in a dispute that has been building for more than a year.
A panel of judges with the US Court of Appeals for the Third Circuit ruled 2-1 that federal law makes Kalshi’s sports markets subject exclusively to the regulation of the Commodity Futures Trading Commission (CFTC), rather than state gambling commissions.
This confirms a previous ruling in the ongoing battle between Kalshi and New Jersey.
In his majority opinion, Judge David J. Porter wrote that his decision was the first appellate court case to define a line between state gaming enforcement efforts and federal regulation of event contracts.
The case began in 2025, when New Jersey’s Division of Gaming Enforcement issued a cease-and-desist order to Kalshi.
The state argued the platform’s contracts, tied to outcomes such as sporting events and elections, amounted to unauthorised betting under state law.
Kalshi rejected that framing, pointing to its registration as a Designated Contract Market and its oversight by the CFTC.
A similar argument was just rejected in Kalshi’s ongoing dispute in Nevada.
However, the Third Circuit sided with the company in this case, leaning on the Commodity Exchange Act and how it defines swaps.
Kalshi not in violation of Commodity Exchange Act
The court said the law does not require a contract to be tied to a traditional financial asset. It only requires a link to potential economic consequences, a threshold the panel found sports outcomes meet without much strain.
Sporting events generate measurable commercial activity, from media rights to sponsorships, which the court treated as sufficient to indicate economic consequences.
Once the contracts qualify as swaps and are listed on a federally regulated exchange, the ruling said, oversight rests solely with the CFTC. State intervention, in that framework, cannot stand.
One of the panel, Judge Jane Roth, dissented, describing the contracts as closely resembling sportsbook wagers in both form and function.
Her concern centred on what falls away if states lose their role in gambling oversight, including consumer protections, licensing controls and tax enforcement.
Decision could impact legal cases in other states
Kalshi has been contesting enforcement actions in several states, with uneven results, and this latest decision in its favour should give its case a boost at the state level.
The business has secured injunctions in Tennessee while encountering resistance in Nevada and Maryland. The Third Circuit’s decision gives the company something it did not have before, an appellate precedent it can carry into those fights.
A parallel case is moving through another federal appeals court involving Maryland. If that court reaches a different conclusion, it could potentially force review by the Supreme Court.
The federal government’s posture has also shifted in recent months, with the Department of Justice taking steps to limit state enforcement against federally regulated exchanges.
The Third Circuit’s ruling aligns with that approach, reinforcing the view that these markets fall within a national regulatory perimeter.
New Jersey authorities are considering what course to take. According to gaming attorney and analyst Daniel Wallach in comments to nextpredict.io/, the case is a prime candidate for an en banc review.
The 2-1 split shows substantial divergence among judges in regard to a matter of law. In line with the federal rules of procedure, the matter could lead to the full Third Circuit bench reviewing the panel’s decision.
Both routes are time-consuming processes. As of now, Kalshi remains free to conduct business inside New Jersey.