3rd U.S. Circuit Court of Appeals bars New Jersey from regulating Kalshi's prediction market
Change
The 3rd U.S. Circuit Court of Appeals ruled that the Commodity Futures Trading Commission (CFTC) — the federal regulator for derivatives trading — has exclusive jurisdiction over sports-related event contracts traded on Kalshi's CFTC-licensed designated contract market, preventing New Jersey gaming regulators from enforcing state gambling laws against those contracts.
Why it matters
State-level gambling statutes can no longer be used to stop trades in event-based swaps offered on a CFTC-licensed designated contract market, narrowing the legal avenues for state enforcement. Regulators seeking to challenge such contracts will face federal preemption and must pursue remedies that account for CFTC exclusivity.
Implications
- • New Jersey gaming regulators must cease enforcement actions and withdraw cease-and-desist orders directed at sports-related event contracts traded on Kalshi's CFTC-licensed designated contract market or risk being overruled in federal court.
- • Prediction market operators' compliance teams must obtain and maintain Commodity Futures Trading Commission (CFTC) designated contract market (DCM) status for sports-related event contracts to rely on federal preemption of conflicting state gaming rules.
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