Kalshi Notches Legal Win in New Jersey as Sports Prediction Court Battles Rage On

The decision represents the first time a federal appeals court has directly addressed the growing dispute over whether states can regulate prediction market platforms.

The core legal question was whether Kalshi's sports event contracts are federally regulated financial derivatives or simply sports bets dressed up in financial language. 

At the heart of Kalshi’s case was its claim that these contracts qualify as swaps, meaning they are financial derivatives governed exclusively by the CFTC under federal law. The agency had previously approved Kalshi as a designated contract market (DCM).

The Third Circuit backed the lower court, finding that Kalshi’s contracts are swaps on a CFTC-licensed market and subject solely to CFTC oversight.

The ruling was not unanimous. US Circuit Judge Jane Richards Roth dissented. She considers Kalshi’s prediction markets to be too similar to sports betting. 

New Jersey Attorney General Jennifer Davenport said her office is evaluating its options. She contends the ruling allows companies to offer unregulated sports betting without a license. 

A Win That Does Not End the War

Monday's ruling is significant, but it occurs in the middle of a contradictory legal landscape. Kalshi won injunctions in New Jersey and Tennessee but lost in Maryland, Ohio, Nevada, and Massachusetts. Given its position in the judicial hierarchy, the Third Circuit’s ruling now sets binding precedent for lower courts in New Jersey, Pennsylvania, and Delaware. Nevada remains the only state to have secured a court-enforced in-effect ban against Kalshi. 

The litigation is now active in 14 states. Arizona has escalated furthest, with Attorney General Kris Mayes filing 20 criminal misdemeanor charges against Kalshi in March 2026, the first criminal prosecution ever brought against a CFTC-registered prediction market operator. The Trump administration has responded by suing Arizona, Connecticut, and Illinois directly, arguing their enforcement efforts violate federal law.