Kalshi Wins Federal Battle: Third Circuit Blocks NJ from Shutting Down Sports Contracts

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New Jersey Loses Bid to Shut Down Kalshi Sports Contracts After Federal Appeal

On Monday, a federal appeals court decided that New Jersey can’t use its gambling laws to close down Kalshi, a platform where people can make predictions on sports. This is a major legal victory for Kalshi, which is regulated by federal authorities.

Key Takeaways:

  • A Third Circuit appeals court ruled 2-1 on April 6, 2026, that federal law blocks New Jersey from enforcing state gambling rules against Kalshi.
  • The decision gives Kalshi federal preemption protection across New Jersey, where the platform reports over $1 billion in weekly trading volume.
  • New Jersey may seek en banc or Supreme Court review, with at least 19 federal Kalshi lawsuits still pending nationwide.

Kalshi Scores Federal Court Win as Third Circuit Strikes Down New Jersey Cease-and-Desist

The U.S. Court of Appeals for the Third Circuit issued a 2-1 decision April 6, 2026, holding that the federal Commodity Exchange Act preempts New Jersey’s attempt to block Kalshi from offering sports-related event contracts to state residents. The ruling affirms a preliminary injunction a federal district court granted in April 2025, which blocked the New Jersey Division of Gaming Enforcement from enforcing a cease-and-desist order against the company.

Kalshi, founded in 2018 and certified by the U.S. Commodity Futures Trading Commission as a designated contract market in 2020, operates a prediction market platform where users trade contracts tied to real-world outcomes. Since early 2025, those offerings have included sporting events such as the Super Bowl, Stanley Cup, and NCAA tournaments. The company earns fees on trades rather than taking positions against users.

New Jersey’s Division of Gaming Enforcement sent Kalshi a cease-and-desist order in March 2025, arguing the platform’s sports contracts violated the New Jersey Sports Wagering Act. State officials raised concerns about wagers on collegiate sports and about users under 21 accessing the platform. Kalshi sued in federal court, claiming CFTC jurisdiction under the Supremacy Clause.

On April 28, 2025, U.S. District Judge Edward S. Kiel ruled in favor of Kalshi, determining they would likely succeed in their case because their contracts are under the sole jurisdiction of the CFTC. New Jersey challenged this decision by appealing to the Third Circuit Court of Appeals, where arguments were presented on September 10, 2025.

As an analyst, I’m following the Third Circuit’s ruling closely. Essentially, the court decided that because Kalshi is a federally regulated exchange – overseen by the CFTC – federal commodities law takes precedence over New Jersey’s state gaming regulations. This means the state can’t enforce its rules on Kalshi’s contracts, and the court’s decision protects Kalshi from any enforcement actions by the New Jersey Division of Gaming Enforcement.

The CFTC has filed separate lawsuits against Arizona, Connecticut, and Illinois over similar state attempts to regulate prediction market platforms. The Third Circuit ruling aligns with the federal agency’s position that these contracts belong under national financial market rules, not state gambling regimes.

Courts haven’t agreed on a consistent decision regarding Kalshi. While Kalshi has temporarily won the right to operate in New Jersey and Nevada, courts in Maryland, Massachusetts, and Ohio have ruled against it. Appeals of these rulings are currently being considered by several federal appeals courts, including the Third, Fourth, and Ninth Circuits.

Legal experts believe this disagreement sets the stage for the Supreme Court to eventually take up the issue. While the Third Circuit Court of Appeals’ decision only directly affects courts in its region, it could influence how other similar cases are decided.

Kalshi insists its platform operates legally across the United States. The company hasn’t publicly responded to a recent decision made on April 6th. New Jersey’s Attorney General’s office also hasn’t made any public statement on the matter.

The recent decision lets Kalshi continue doing business in New Jersey without the state stepping in regarding sports betting contracts. Existing sportsbooks, which pay fees and taxes to the state, are worried about competing with online platforms regulated by the federal government that don’t follow the same rules. How to verify ages and protect the fairness of college sports are still important issues to be addressed.

New Jersey can seek a rehearing before the full Third Circuit or petition the Supreme Court. Neither step would automatically pause the ruling’s effect. The company is involved in at least 19 federal lawsuits nationwide. Other competitors like Polymarket have their own cases. The outcome of those cases, along with any appeals court decisions in other circuits, will determine how far the federal preemption argument extends.

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2026-04-06 19:27