A federal appeals court on Friday said New Jersey cannot regulate sports bets on prediction markets, handing Kalshi a win in a closely watched fight over who controls sports-related event contracts.
In a 2-1 decision, the US Court of Appeals for the 3rd Circuit upheld a district court injunction that had already blocked the New Jersey Division of Gaming Enforcement from enforcing state law against Kalshi’s contracts. The company is registered with the Commodity Futures Trading Commission as a designated contract market, and the panel said that status puts its sports offerings under federal oversight instead of state gambling rules.
The majority said the text of federal law points to a narrow reading that favors Kalshi. It wrote that the law preempts state statutes that directly interfere with swaps traded on designated contract markets, and said Kalshi’s sports-related event contracts fall into that category because they are swaps traded on a CFTC-licensed market. The ruling appears to be the first appeals court decision on the issue.
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The dispute began last year, when New Jersey sent Kalshi a cease-and-desist letter accusing it of listing unauthorized sports wagers in violation of the New Jersey Sports Wagering Act and the state constitution. The statute requires licenses to offer sports wagers, and the constitution bars betting on college sports. Kalshi then won a preliminary injunction stopping the state from enforcing its law while the case moved forward.
Circuit Judge Jane Roth dissented, saying Kalshi’s offerings are “virtually indistinguishable from the betting products available on online sportsbooks, such as DraftKings and FanDuel.” She wrote that when she looked at the Kalshi page for the Carolina Panthers-Tampa Bay Buccaneers game on Jan. 3, 2026, she could have bet on the winner, whether Tampa Bay would win by more than 2.5 points, whether the teams would score 45 or more points, or whether Mike Evans would score a touchdown.
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Roth said Kalshi argues it is outside state regulation because it does not offer gambling products and instead sells swaps subject to the CFTC’s exclusive jurisdiction. But she called that “acts of alchemy that transmute its products from sports gambling to futures trading” and said the company’s approach is “a performative sleight meant to obscure the reality that Kalshi’s products are sports gambling.” In her view, because Kalshi is facilitating gambling, it can be regulated by the state.
The ruling sharpens a broader legal question that sits at the center of the case: whether the CFTC’s exclusive jurisdiction over designated contract markets overrides New Jersey gambling law and the state’s ban on collegiate sports betting. For now, the answer from the 3rd Circuit is yes.
