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- CFTC wins as appeals court grants exclusive authority over Kalshi event contracts nationwide.
- Third Circuit blocks New Jersey gaming laws, affirming federal oversight of DCM platforms.
- A ruling reduces state enforcement risk and strengthens regulatory clarity for prediction markets.
The Commodity Futures Trading Commission (CFTC) secured a key legal win after a federal appeals court ruled it holds exclusive authority over event contracts traded on Kalshi’s platform. The decision limits state action against federally regulated markets.
The ruling came from the United States Court of Appeals for the Third Circuit in a 2-1 decision. Judges upheld a preliminary injunction that blocks New Jersey from enforcing its gaming laws on Kalshi. The case is titled KalshiEx LLC v. Flaherty et al.
CFTC Authority Upheld as Court Backs Federal Oversight
The court confirmed that Kalshi operates as a designated contract market under federal law. It said such platforms fall under the CFTC’s jurisdiction. This finding restricts states from applying separate gambling rules to these contracts.
CFTC Chairman Michael S. Selig reacted to the decision. He described it as a strong outcome for federal oversight. In a post on X, he said the ruling supports the agency’s regulatory role over DCMs.
The dispute began after Kalshi introduced sports-related event contracts in early 2025. The New Jersey Division of Gaming Enforcement raised concerns about these products. Officials argued that the contracts resembled online sports betting.
The state, supported by Attorney General authorities, issued a cease-and-desist order. It claimed Kalshi violated the Sports Wagering Act and state constitution. The regulator warned the company against offering such contracts to residents.
Kalshi challenged the order in federal court. It argued that its contracts are governed by the Commodity Exchange Act. The firm also said federal law overrides conflicting state rules in this case.
Also Read: Nevada Files Enforcement Action Against Kalshi Over Unlicensed Wagering
Ruling Strengthens CFTC Regulatory Framework
A district court granted a preliminary injunction in favor of Kalshi. This stopped New Jersey from taking enforcement action. The state later appealed the decision to the Third Circuit.
This decision will now provide guidelines to the platforms that have been registered by the CFTC. This decision is applicable to all jurisdictions of the Third Circuit. This includes New Jersey, Pennsylvania, Delaware, and the U.S. Virgin Islands.
This judgment has minimized the possibility of state-enforced proceedings against the platforms in the future. It has helped create a regulatory regime for prediction markets. Prediction markets allow trade based on the outcome of real-life events.
After this decision, Kalshi and its competitors can now offer additional services. It has improved the confidence level of regulated markets. Nonetheless, there could be more litigation cases in other jurisdictions.
New Jersey might try to challenge this decision further. This can be done through an appeal to the U.S. Supreme Court or through an en banc proceeding.
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