New Jersey has no right to ban Kalshi’s prediction market, US appeals court rules
Kalshi cannot be arrested in New Jersey. A third panel of the U.S. Court of Appeals ruled Monday that New Jersey does not have the authority to regulate the Kalshi prediction market, allowing people to bet on the outcomes of sporting events. That power belongs to the Commodity Futures Trading Commission, the panel ruled 2-1.
The CFTC is led by President Donald Trump appointee Michael Selig, who openly and actively supports prediction markets like Kalshi and Polymarket, calling them “exciting products.” The Trump family agrees: Donald Trump Jr. is a paid advisor to Kalshi and an unpaid advisor to Polymarket, and Truth Social, which is run by the Trump Media and Technology Group, is about to launch its own prediction marketplace.
Online prediction markets are an emerging phenomenon that allows users to bet on the outcome of virtually everything, from local sporting competitions to deadly military invasions. Although new, these markets have already shown evidence of insider trading on an extreme scale, with suspicious bets and large payouts linked to U.S. and Israeli military strikes in Iran, as well as the brief U.S. invasion of Venezuela. According to blockchain analyst DeFi Oasis, less than 0.04% of Polymarket accounts captured more than 70% of profits, totaling $3.7 billion.
Several state gaming regulators have filed lawsuits against Kalshi and Polymarket in recent months, and last week the CFTC sued Arizona, Connecticut and Illinois over their attempts to regulate prediction markets. While each state has its own angle, from election issues to underage betting, they all largely claim that prediction markets are nothing more than illegal gambling businesses. Today’s ruling marks the first decision at the federal level in one of these cases and it is in favor of prediction markets.
New Jersey sent Kalshi a cease and desist letter in 2025, saying the service violated the state’s ban on college sports betting. Kalshi escalated the situation and sued New Jersey, arguing that its sports contracts are actually swaps, a type of financial investment that is (conveniently) regulated by the CFTC. A lower court judge previously sided with Kalshi, prompting New Jersey to appeal. Two of the three judges in that appeal ruled that Kalshi’s sporting event contracts were indeed exchanges. Tarek Mansour, CEO of Kalshi, called Monday’s decision “a big victory for the industry.”
U.S. Circuit Judge Jane Richards Roth disagreed, writing that Kalshi’s “offerings were virtually indistinguishable from betting products available at online sportsbooks, such as DraftKings and FanDuel.”
New Jersey Attorney General Jennifer Davenport has the option to ask the full 3rd Circuit to rehear the case, and the case is also pending in several other courts.
