First Federal Appeals Court Rules CFTC Has Exclusive Jurisdiction Over Kalshi in Landmark New Jersey Case

The Third Circuit Court of Appeals handed prediction markets their biggest legal victory yet on April 6, 2026 — a 2-1 decision ruling that New Jersey gaming regulators cannot stop Kalshi from offering sports event contracts to users in the state. More importantly, it became the first time a federal appeals court has ruled on the central legal question that has been tearing through courthouses across the country: does federal law preempt state gambling regulations when a CFTC-licensed prediction market is involved?

The short answer, at least in New Jersey, Pennsylvania, and Delaware: yes.

The ruling does not end the broader legal war between prediction market platforms and state regulators. Courts in Nevada and Massachusetts have reached the opposite conclusion. But for users, investors, and platforms navigating the prediction market legal landscape, this decision changes the calculus significantly — and almost certainly sets the industry on a path toward the U.S. Supreme Court.

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Background: How Kalshi Ended Up in Federal Court

Kalshi launched in 2021 as a CFTC-approved Designated Contract Market (DCM) for event contracts in the United States. Its regulatory framework is straightforward in theory: because Kalshi operates a federally-licensed exchange under the Commodity Exchange Act (CEA), the CFTC — not state gaming agencies — has jurisdiction over the contracts traded on its platform.

Most states accepted this framing, even if reluctantly. New Jersey did not.

In March 2025, New Jersey's Division of Gaming Enforcement (DGE) sent Kalshi a cease-and-desist letter, demanding the platform stop offering sports-related event contracts in the state. The DGE argued Kalshi was operating an unlicensed gambling operation in violation of state law, including rules prohibiting betting on collegiate sports.

Kalshi's response was to sue New Jersey officials directly rather than comply. A federal district court sided with Kalshi in April 2025, issuing a preliminary injunction that blocked New Jersey from enforcing its cease-and-desist while the lawsuit played out. New Jersey appealed that decision to the Third Circuit — and on April 6, 2026, the appeals court affirmed it.

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What the Court Actually Decided

The Third Circuit ruling addressed two core legal questions. Both answers went Kalshi's way.

First: Are Kalshi's sports event contracts "swaps" under federal law?

New Jersey argued that sports event contracts — contracts tied to the outcome of games, point spreads, and similar events — aren't really swaps because they're not "joined or connected" to a financial, economic, or commercial instrument. In other words: these are sports bets, not financial derivatives.

Circuit Judge David Porter, writing for the majority, rejected this argument. "New Jersey argues that Kalshi's event contracts are not 'swaps' covered by the Act because the outcome of a sports game is not 'joined or connected' with a financial, economic, or commercial instrument or measure," Porter wrote. "But its proposed 'joined or connected' requirement raises the bar beyond what the Act requires."

The court found that the CEA's definition of swaps is broad enough to cover Kalshi's contracts. Once the contracts qualify as swaps, they fall under the CFTC's exclusive jurisdiction.

Second: Does federal law preempt New Jersey's gambling regulations?

Once you establish that Kalshi's contracts are federally-regulated swaps traded on a licensed DCM, the preemption question follows. The court found not just one but two grounds for preemption.

On field preemption, the court found that federal law occupies the entire field of "trading on a designated contract market" — not gambling broadly. Because the relevant regulatory space is DCM trading, Congress has spoken, and there is no room for state regulation to operate alongside it.

On conflict preemption, the court found that allowing New Jersey to enforce its gambling laws would create an obstacle to executing the CEA's goals. "Allowing New Jersey to enforce its gambling laws and state constitution would create an obstacle to executing the Act because such state enforcement would prohibit Kalshi, which operates a licensed DCM under the exclusive jurisdiction of the CFTC, from offering its sports-related event contracts in New Jersey," Porter wrote. "This state regulation is exactly the patchwork that Congress replaced wholecloth by creating the CFTC."

The CFTC welcomed the ruling. "Congress gave the CFTC exclusive jurisdiction over trades on DCMs, and this decision affirms the goals of Congress," CFTC spokesperson Brooke Nethercott said in a statement following the ruling. CFTC Chairman Michael Selig described it as a major victory for federal oversight of prediction markets and said the ruling "reaffirms Congress' intent for the CFTC to have exclusive regulatory jurisdiction over trades on DCMs."

Kalshi CEO Tarek Mansour called it "a big win for the industry and millions of users."

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The Dissent: A "Performative Sleight"

The ruling was not unanimous, and that matters.

Circuit Judge Jane Richards Roth penned a dissent that reads like an indictment of the industry. She argued that Kalshi's sports event contracts — which include who will win an NFL game, the point spread, the combined point total — are "virtually indistinguishable from the betting products available on online sportsbooks, such as DraftKings and FanDuel."

Her core argument: calling something a "swap" on a federally-licensed exchange does not transform its underlying nature. "I see Kalshi's actions as a performative sleight meant to obscure the reality that Kalshi's products are sports gambling," Roth wrote. "Because Kalshi is facilitating gambling, it can be subjected to state regulation."

Roth also pushed back on the breadth of the majority's field preemption theory, cautioning that "DCM trading is not the sort of comprehensive field where the federal interest is so dominant that Congress intended for the 'complete ouster of state power.'"

The 2-1 outcome means New Jersey has the option to request a rehearing en banc — a full hearing before all 14 active Third Circuit judges rather than just the three-judge panel. New Jersey Attorney General Jennifer Davenport signaled exactly that possibility in her response: "We profoundly disagree with today's decision allowing certain companies to offer sports gambling in our States without following the careful gaming rules that everyone else follows. We're evaluating all options in our case."

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The Circuit Split: Same Week, Opposite Outcome in Nevada

The Third Circuit's pro-Kalshi ruling landed less than 72 hours after a Nevada state court extended an injunction blocking Kalshi from offering the same types of contracts.

The Nevada ruling rests on different legal footing — it is a state court applying state gaming law, while the Third Circuit is a federal appellate court applying federal preemption doctrine. But the practical effect is a direct contradiction: Kalshi's sports event contracts are legally protected in New Jersey while simultaneously prohibited in Nevada.

This is the foundation of a circuit split in the making. The Ninth Circuit Court of Appeals, which covers Nevada and California, was scheduled to hear oral arguments on the Nevada case in mid-April 2026. The CFTC filed an amicus brief to the Ninth Circuit defending Kalshi's federal preemption argument — a sign of the Trump administration's commitment to protecting prediction markets from state interference.

CFTC Chairman Selig said directly that it is "important that the federal regulator defend its 'exclusive jurisdiction over these markets'" — framing it as an institutional imperative, not a discretionary choice.

If the Ninth Circuit rules against Kalshi, confirming state authority to restrict prediction markets, the resulting split with the Third Circuit would become the clearest possible invitation for U.S. Supreme Court review.

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State-by-State Scorecard: Where Courts Have Ruled

The New Jersey ruling adds one clear entry to the growing legal scoreboard:

Federal courts finding for Kalshi (preemption upheld):

• New Jersey — Third Circuit (April 6, 2026): CFTC has exclusive jurisdiction; preliminary injunction affirmed. Sports contracts active.
• Tennessee — Federal district court (February 19, 2026): Preliminary injunction granted; Kalshi sports contracts active.

State regulators prevailing (at least temporarily):

• Nevada — State court: Injunction blocking sports, election, and entertainment contracts. May 4, 2026 geofencing deadline.
• Ohio — Federal district court (March 9, 2026): Denied Kalshi's preliminary injunction; sports contracts subject to Ohio law. Kalshi appealing to Sixth Circuit.
• Massachusetts — Ruling against Kalshi on hold pending appeal.
• Maryland — Injunction denied; litigation continues.

Active litigation without resolved injunction: Arizona, Connecticut, Illinois (CFTC filed suits in late March 2026 to preempt state enforcement actions), Michigan, and Washington.

For the full current picture of Kalshi's state availability, see our prediction market legality by state guide.

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What This Means If You Trade on Kalshi Today

As of April 6, 2026, Kalshi can continue offering sports event contracts to New Jersey users while the underlying litigation proceeds. The preliminary injunction means New Jersey cannot pursue civil or criminal enforcement actions against the platform during this period.

For users in states not listed above, Kalshi continues to operate across its full market lineup — sports, political, economic, and entertainment event contracts. The cases playing out in Nevada, Ohio, Massachusetts, and elsewhere do not change that unless a court issues a specific injunction affecting your state.

That said, the legal situation is moving quickly. What is true today may not be true in 30 days if a higher court issues a new ruling. Always check Kalshi's state availability page at kalshi.com before depositing funds.

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What Comes Next: The Road to the Supreme Court

The prediction market legal battle is entering a new phase. Here is what to watch:

En banc petition: New Jersey AG Jennifer Davenport has signaled she will evaluate "all options," which includes seeking a rehearing before all 14 active Third Circuit judges. If granted, the full court could reverse the panel's ruling.

9th Circuit oral arguments, mid-April 2026: The Ninth Circuit will hear the Nevada case. The CFTC filed an amicus brief defending federal preemption. If the 9th Circuit upholds Nevada's authority, a formal circuit split emerges and Supreme Court review becomes near-certain.

CFTC's aggressive posture: The agency sued Arizona, Connecticut, and Illinois in late March 2026 to prevent state enforcement actions before they reach the injunction stage. This signals the CFTC intends to fight on multiple fronts simultaneously.

Sixth Circuit: Kalshi is appealing the Ohio district court ruling. Another appellate opinion — for or against — will deepen the legal record and reinforce the push toward Supreme Court resolution.

For background on the CFTC's broader regulatory framework for prediction markets, see our CFTC prediction markets rulemaking guide.

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Frequently Asked Questions

What does the Third Circuit ruling actually mean for Kalshi users?

It means New Jersey cannot block Kalshi from operating while the legal case continues. The ruling affirmed a preliminary injunction — not a final decision on the merits — which keeps Kalshi's sports contracts active in New Jersey, Pennsylvania, and Delaware until the courts reach a final ruling on the underlying lawsuit.

Does this ruling apply outside New Jersey?

The Third Circuit's jurisdiction covers New Jersey, Pennsylvania, Delaware, and the U.S. Virgin Islands. Courts in other circuits — including the Ninth Circuit, which covers Nevada and California — are not bound by this ruling. That is why Nevada can simultaneously maintain an injunction blocking Kalshi while New Jersey cannot.

What is "federal preemption" and why does it matter here?

Federal preemption means federal law overrides state law in an area where Congress has legislated. The Commodity Exchange Act grants the CFTC exclusive jurisdiction over trades on licensed Designated Contract Markets. The Third Circuit ruled this preempts state gambling laws — states cannot apply their own rules to DCM-regulated platforms. If the Supreme Court eventually agrees, it would resolve the patchwork of conflicting state rulings nationwide.

Is Kalshi available in my state right now?

Kalshi operates in most U.S. states. Sports contracts face restrictions or ongoing litigation in Nevada, Maryland, Ohio, Massachusetts, and several other states. Political and economic event contracts are generally available more broadly. Check our state-by-state legality guide for the most current breakdown, and verify directly at kalshi.com before depositing.

Could the Supreme Court overturn all of this?

A Supreme Court ruling would bring national uniformity — either confirming CFTC jurisdiction everywhere or allowing states to regulate prediction markets as gambling. The current divergence between the Third Circuit and incoming Ninth Circuit rulings is the most direct path to SCOTUS review. No cert petition has been filed yet, but the conditions for one are forming rapidly.

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Conclusion

The Third Circuit's April 6, 2026 ruling is the most significant legal development in prediction market history. It is the first federal appellate court to rule on the core jurisdictional question that every state regulator and every prediction market platform has been fighting over — and it came down clearly on the side of federal authority.

The dissent is not without merit. The 2-1 vote leaves a door open. But for now, prediction markets operating on CFTC-licensed exchanges have their first appellate validation that federal law protects them from state enforcement.

The battle moves to the Ninth Circuit, to Nevada, to the Sixth Circuit in Ohio, and eventually — almost certainly — to the Supreme Court.

Explore how prediction markets work and where you can trade on PredictionMarkets.US. Check out our Kalshi guide or browse the full state legality breakdown to see where each platform stands near you.

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Sources & Verification

• Third Circuit ruling, April 6, 2026, 2-1 decision: Reuters — verified April 8, 2026
• CNBC coverage of Third Circuit ruling: CNBC — verified April 8, 2026
• Judge Porter majority quotes: Reuters, April 6, 2026 — verified April 8, 2026
• Judge Roth dissent quotes ("performative sleight"): Reuters, April 6, 2026 — verified April 8, 2026
• NJ AG Jennifer Davenport statement: Reuters, April 6, 2026 — verified April 8, 2026
• CFTC spokesperson Brooke Nethercott statement: Reuters, April 6, 2026 — verified April 8, 2026
• CFTC Chairman Selig reaction: Reuters/CNBC, April 6, 2026 — verified April 8, 2026
• Kalshi CEO Tarek Mansour quote: Reuters, April 6, 2026 — verified April 8, 2026
• Nevada injunction (same week), Massachusetts ruling, CFTC suits AZ/CT/IL: Reuters, April 6, 2026 — verified April 8, 2026
• Ohio district court ruling (March 9, 2026): — verified