Federal Court Paves Way for Kalshi's Prediction Market in New Jersey

A federal appeals court has decided that New Jersey can't stop Kalshi from allowing sports betting on its prediction market. The court ruled the U.S. Commodity Futures Trading Commission has jurisdiction over such contracts, marking a significant moment in the clash between state regulators and prediction market operators.

A federal appeals court has ruled that New Jersey gaming regulators cannot stop Kalshi from facilitating sports betting on its platform. The 3rd U.S. Circuit Court of Appeals found in a 2-1 decision on Monday that the U.S. Commodity Futures Trading Commission (CFTC) has exclusive jurisdiction over sports-related event contracts traded on Kalshi's platform.

This ruling is pivotal in the ongoing conflict over states' regulatory powers over prediction market activities. Kalshi and other businesses enable users to profit from predictions on sports and elections, but many states argue these activities breach local gaming laws. New Jersey had previously warned Kalshi through a cease-and-desist letter over its sports event contracts.

Kalshi maintains that its contracts fall under the category of 'swaps' as defined by the Commodity Exchange Act, which the CFTC oversees, and secured a lower court injunction in its favor. While New Jersey's appeal was turned down, differing opinions persist, with criticism distinguishing Kalshi's market as similar to traditional gambling operators like DraftKings.

(With inputs from agencies.)