GoKawiilA federal appeals court ruled that New Jersey cannot regulate sports bets on prediction markets because the US Commodity Futures Trading Commission (CFTC) has exclusive jurisdiction.
Kalshi, which is registered with the CFTC as a designated contract market (DCM), last year won a preliminary injunction preventing the New Jersey Division of Gaming Enforcement from enforcing a state law against its sports-related event contracts. The injunction issued by a district court was upheld today in a 2-1 decision by judges at the US Court of Appeals for the 3rd Circuit.
The CFTC has exclusive jurisdiction over DCMs under the Commodity Exchange Act, a US law. The question in the Kalshi lawsuit is whether the CFTC’s exclusive jurisdiction “preempts New Jersey gambling laws and the state constitution’s prohibition on collegiate sports betting,” the appeals court majority wrote. “New Jersey frames the issue broadly (regulating all sports gambling) rather than narrowly (regulating trading on federally designated contract markets).”
Chief Judge Michael Chagares and Circuit Judge David Porter sided with Kalshi in a decision written by Porter, saying that the federal law’s text “suggests that the narrow framing is the better reading.” It thus “preempts state laws that directly interfere with swaps traded on DCMs. Kalshi’s sports-related event contracts are swaps traded on a CFTC-licensed DCM, so the CFTC has exclusive jurisdiction.”
The case began last year after New Jersey sent a cease-and-desist letter to Kalshi, alleging that it was listing unauthorized sports wagers in violation of the New Jersey Sports Wagering Act and the New Jersey constitution. The state’s Sports Wagering Act requires licenses to offer sports wagers, and the state constitution prohibits betting on college sports.