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A federal appeals ruling has widened the fight over sports event contracts and who gets to police them. The Third Circuit said New Jersey cannot use state gambling law against Kalshi in that case, adding a new layer to a fast-growing legal split around prediction markets and sports wagering.
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Kalshi got what may be its most important court result yet. On Monday, the US Court of Appeals for the Third Circuit upheld a preliminary injunction that blocks New Jersey from enforcing state gambling law against Kalshi while the case continues. At the center of the dispute is a simple question with very big money behind it: are sports event contracts federally regulated swaps, or are they sports bets that states can control?
The panel majority took the narrower federal view. Judge David Porter wrote: “Kalshi’s sports-related event contracts are swaps traded on a CFTC-licensed DCM, so the CFTC has exclusive jurisdiction.” That reading kept the focus on trading activity on a federally supervised designated contract market, not on broad state power over all sports gambling inside state borders.
New Jersey had tried to stop Kalshi with a cease-and-desist letter in 2025, arguing the company was offering unauthorized wagering. Kalshi answered with a lawsuit, saying the contracts sit under the Commodity Exchange Act and under oversight from the Commodity Futures Trading Commission. A district court agreed in April 2025, and now the Third Circuit has backed that early result.
Even so, the opinion hardly ended the fight. Judge Jane Roth broke sharply from the majority and wrote that Kalshi offerings “are virtually indistinguishable from the betting products available on online sportsbooks, such as DraftKings and FanDuel.” That line matters because it gives state regulators a clean argument to keep using in other courts.
For the gambling industry, the timing is huge. Kalshi has been under pressure across multiple fronts, yet the company now has the first federal appeals court ruling in the country on the core preemption issue. CEO Tarek Mansour called it “a big win for the industry and millions of users.” Reuters also reported that Kalshi trading volume now tops $1 billion a week, showing how much is riding on the outcome.
What comes next looks even more important than what just happened. Nevada still has a court-enforced ban in place through at least April 17 while terms for a longer injunction are finalized. The Ninth Circuit is set to hear a consolidated appeal involving Kalshi, Robinhood, and Crypto.com on April 16. Maryland is already on appeal in the Fourth Circuit, with oral argument set for May. If appellate courts keep splitting, Supreme Court review becomes much easier to imagine.
Federal officials are also getting more aggressive. On April 2, the CFTC sued Arizona, Connecticut, and Illinois, arguing those states were interfering with exclusive federal authority over national swaps markets. Chairman Michael Selig said the agency “will continue to safeguard its exclusive regulatory authority over these markets and defend market participants against overzealous state regulators.” That adds a second battlefield beyond the private suits already underway.
So, while New Jersey lost a key round, the wider map still cuts both ways. Reuters noted wins for state regulators in Nevada, Maryland, and Ohio, while Kalshi has also picked up support in Tennessee and now in the Third Circuit. For operators, sportsbooks, tribes, regulators, and rival platforms, the fight is no longer just about Kalshi. It is about whether prediction markets sit inside financial law, gambling law, or some uneasy overlap of both.