Kalshi Wins Appeals Court Ruling Against New Jersey on Sports Betting Jurisdiction

A federal appeals court in Philadelphia ruled 2-1 on Monday that Kalshi's sports wagers fall under CFTC jurisdiction rather than New Jersey state gambling laws, marking the prediction market platform's biggest legal victory. The Third Circuit panel, with Chief Judge Michael A. Chagares and Judge David J. Porter in the majority, affirmed a preliminary injunction against New Jersey's cease-and-desist order. Judge Jane R. Roth dissented, arguing Kalshi's federal registration is a "performative sleight" obscuring sports gambling. The ruling comes amid nationwide jurisdictional disputes, with Nevada recently banning Kalshi and the Trump administration suing Illinois, Arizona, and Connecticut over prediction market regulation. The matter will likely reach the Supreme Court for final resolution.

Appeals Court Ruling on Federal vs. State Jurisdiction

• ▪A panel of federal appeals judges ruled 2-1 on Monday that wagers on Kalshi, including those related to sports, fall under the federal purview of the CFTC.
• ▪New Jersey gambling regulators argued that Kalshi's sports-related markets were unregistered sports bets by another name.
• ▪The appeals court affirmed a preliminary injunction granted last spring against New Jersey after gambling regulators in the state sent Kalshi a cease-and-desist order.
• ▪A federal appeals court in Philadelphia ruled on Monday that New Jersey has no claim to regulate Kalshi under existing state gambling laws.
• ▪In April, a federal judge in New Jersey ruled that New Jersey could not enforce a ban on Kalshi as the case proceeded to trial because Kalshi was likely to succeed on the merits of its case.
• ▪Kalshi argued that its sports-related markets were event contracts exclusively regulated by the CFTC.

Judicial Split and Legal Reasoning

• ▪Judge Jane R. Roth was appointed to the Third Circuit Appeals Court in 1991 by former President George H.W. Bush.
• ▪Judge Jane R. Roth argued that Kalshi's registration as a DCM and branding of its wagers as sports-event contracts does not change their inherent nature as bets on the outcomes of sports games.
• ▪Judge David J. Porter, appointed by President Donald Trump, affirmed the ruling in favor of Kalshi.
• ▪Judge Jane R. Roth stated that Kalshi's actions are a performative sleight meant to obscure the reality that Kalshi's products are sports gambling.
• ▪Judge Jane R. Roth was the sole dissenting judge in the Monday ruling on Kalshi.
• ▪Chief Judge Michael A. Chagares, appointed to the Third Circuit Appeals Court by former President George W. Bush, affirmed the ruling in favor of Kalshi.

Broader National Legal Battle Over Prediction Markets

• ▪On Friday, a Nevada state judge extended the initial 14-day ban on Kalshi for another two weeks.
• ▪The matter of prediction market regulation is likely to ultimately be decided by the Supreme Court.
• ▪Last week, the Trump CFTC and the Department of Justice sued Illinois, Arizona, and Connecticut for attempting to regulate prediction market platforms.
• ▪For over a year, state and federal courts across the country have come to vastly differing conclusions in the jurisdictional dispute over prediction market regulation.
• ▪The Trump administration has argued that prediction markets should not have to comply with state gambling laws.
• ▪The Monday appeals court ruling on Kalshi can only be appealed to the U.S. Supreme Court unless the 3rd Circuit opts for a rare en banc review.

Perspective of Kalshi

• ▪The Monday appeals court ruling represents Kalshi's biggest legal victory to date in jurisdictional disputes over prediction market regulation.
• ▪Kalshi argued that its sports-related markets were event contracts exclusively regulated by the CFTC.

Perspective of New Jersey gambling regulators

• ▪New Jersey gambling regulators sent Kalshi a cease-and-desist order before the preliminary injunction was granted.
• ▪New Jersey gambling regulators argued that Kalshi's sports-related markets were unregistered sports bets by another name.

Perspective of Judge Jane R. Roth

• ▪Judge Jane R. Roth stated that Kalshi's actions are a performative sleight meant to obscure the reality that Kalshi's products are sports gambling.
• ▪Judge Jane R. Roth argued that Kalshi's registration as a DCM and branding of its wagers as sports-event contracts does not change their inherent nature as bets on the outcomes of sports games.

Perspective of Trump administration

• ▪The Trump administration has argued that prediction markets should not have to comply with state gambling laws.
• ▪Last week, the Trump CFTC and the Department of Justice sued Illinois, Arizona, and Connecticut for attempting to regulate prediction market platforms.

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