Kalshi New Jersey Win Hailed as a Win for Prediction Markets

Prediction market company Kalshi has secured a legal victory in its dispute with New Jersey state regulators after a federal appeals court ruled that the Commodity Futures Trading Commission (CFTC) has authority over the platform. 

The US Court of Appeals for the Third Circuit upheld a preliminary injunction stopping officials who oversee the New Jersey sports betting market from enforcing state gambling laws against Kalshi’s sports contracts. In a 2-1 decision, the court found that the lower court had not erred in blocking the state’s actions. 

Judge David J. Porter, writing for the majority, said Kalshi had shown a reasonable likelihood of success in arguing that federal law pre-empts state regulation under the Commodity Exchange Act.  

The decision comes amid increasing efforts by several states to challenge prediction market apps, which allow users to trade on the outcomes of events, including sports, politics, and economic indicators. State regulators have argued that such platforms function as gambling operations and should be subject to local oversight. 

The decision was described by Kalshi co-founder Tarek Mansour as a significant outcome for the sector, and legal analysts said the ruling could influence similar cases, including an ongoing dispute between Kalshi and Nevada in the Ninth Circuit, although some expect that differing rulings across jurisdictions could lead to eventual review by the US Supreme Court. 

“This is the strongest indication we’ve seen from a federal court of how the merits will go,” said Ilya Beylin, a law professor at Seton Hall University. “This is a strong signal.” 

In recent months, the CFTC has been more active in supporting prediction markets and has taken legal action against multiple states. 

Washington Attorney General files lawsuit

While this may be a temporary win for Kalshi, it hasn’t stopped states from filing lawsuits against the operator. Last week, Washington Attorney General Nick Brown joined the fray, accusing Kalshi of offering illegal gambling in the state.  

The complaint argues that Kalshi’s offerings meet the legal definition of gambling under Washington’s Gambling Act, which prohibits staking something of value on uncertain outcomes. It also alleges violations of the state’s Consumer Protection Act. 

According to the lawsuit, Kalshi allows users to place wagers on outcomes including sports events, elections, public health data, and court proceedings, with payouts determined by odds. The state claims this mirrors the structure of traditional sports betting. 

Brown said the platform enables wagering across a wide range of events and accused the company of encouraging betting behavior that is not permitted under Washington law. Online gambling has been prohibited in the state since 2006; the Washington sports betting market is very limited.

The lawsuit seeks to halt Kalshi’s operations in Washington, recover losses incurred by residents, and impose civil penalties. State officials also raised concerns about how easily prediction market sites can be accessed and the risk of increased gambling-related harm. 

Washington regulators maintain that strict gambling controls are necessary to protect consumers.