Kalshi Wins in New Jersey: Prediction Markets Get Federal Endorsement, Key Ruling in the Regulatory Authority Battle

Gate News message: The U.S. prediction market platform Kalshi has made a key breakthrough in its legal dispute with the state of New Jersey. In a 2-1 ruling, the U.S. Court of Appeals for the Third Circuit determined that Kalshi may continue offering sports-related contracts in the state. The core rationale was that the relevant transactions fall under federal oversight, giving the U.S. Commodity Futures Trading Commission (CFTC) exclusive jurisdiction.

The dispute in this decision centered on whether prediction market contracts should be treated as gambling. New Jersey argued that its gambling regulations apply to all sports-related transactions. However, the majority opinion held that Kalshi’s product fits the definition of “swaps,” placing it within the scope of federal commodities law regulation rather than traditional gambling activities.

The court further noted that these contracts are tied to economic outcomes and meet the standards under federal law for financial derivatives. Even the dissenting judge acknowledged that these prediction market contracts have swap-like characteristics. Based on this, if state enforcement were to step in, it would conflict with the existing federal regulatory framework.

On the procedural side, the court upheld the preliminary injunction against New Jersey, finding that Kalshi had shown a likelihood of success on the merits and faced potential irreparable harm. This means that, before the case reaches a final ruling, state regulators cannot temporarily restrict its operations under gambling laws.

Of note, the case is seen as a landmark matter in the U.S. where a federal appellate court directly addressed the legality of prediction markets for the first time. As prediction markets expand their use in political, economic, and geopolitical events, their regulatory boundaries are being scrutinized more closely. Previously, Kalshi also faced litigation pressure over contracts related to international conflicts.

This ruling highlights the tension between U.S. federal and state regulatory authority, and it also sends a phased positive signal for the prediction market industry. How the relevant regulatory frameworks will be unified going forward will remain a key focus for the market.