New Jersey has no right to ban Kalshi's prediction market, US appeals court rules
Just 0.04% of accounts on the Polymarket platform captured over 70% of all profits, translating to a staggering $3.7 billion—data that sheds new light on the controversial prediction market. A U.S. appeals court has just ruled that the state of New Jersey does not have the right to ban the operations of the Kalshi platform, determining that oversight of such instruments falls under the federal Commodity Futures Trading Commission (CFTC) rather than local gambling regulators. The judges sided with the argument that Kalshi's sports betting offerings are, in fact, financial swaps rather than traditional gambling. This decision sets a powerful precedent for the entire financial technology sector and data-driven markets. For global users, it signals a green light for the further development of platforms where one can bet on almost anything: from election results and armed conflicts to local sporting events. Although critics point to the massive scale of insider trading and similarities to services like DraftKings, support from the CFTC and the political ties of platform owners to Donald Trump’s inner circle suggest that prediction markets will become a permanent fixture of the digital investment landscape. The ruling drastically limits the room for maneuver for local authorities who attempted to combat the phenomenon under the guise of fighting illegal gambling.
The decision of the 3rd US Circuit Court of Appeals regarding the Kalshi platform is a turning point for the entire prediction markets sector. The court ruled 2-1 that the state of New Jersey does not have the authority to regulate or prohibit Kalshi's activities, even in the area of betting on sporting events. This verdict de facto strips state regulators of control over a new wave of digital financial instruments, shifting full jurisdiction into the hands of the Commodity Futures Trading Commission (CFTC).
The dispute, which reached its conclusion in federal court, began in 2025 when New Jersey sent Kalshi a cease and desist order. State authorities argued that the platform violated a local ban on betting on academic sports competitions. Kalshi responded with a legal offensive, pushing a narrative according to which their sports contracts are not gambling, but so-called swaps — a type of derivative financial instrument. The Court of Appeals agreed with this interpretation, finding that the specific nature of these contracts places them in the sphere of investments regulated by the CFTC, rather than in the category of traditional bookmaking.
A political umbrella over prediction markets
Kalshi's victory coincides with an extremely favorable political climate in Washington. The CFTC is currently headed by Michael Selig, appointed by President Donald Trump. Selig does not hide his enthusiasm for platforms such as Kalshi or Polymarket, describing them as "exciting products." Such support at the federal level creates a unique protective barrier for a sector that just a few years ago balanced on the edge of legality.
Federal offensive against the states
The ruling in the New Jersey case is just the beginning of a broader battle. The CFTC under Selig's leadership has moved to counterattack, suing Arizona, Connecticut, and Illinois in connection with their attempts to enforce local regulations against prediction markets. The strategy is clear: unification of oversight at the federal level and cutting off state claims that treat Kalshi or Polymarket as illegal gambling operations.
"This is a great victory for the entire industry," – briefly commented Tarek Mansour, CEO of Kalshi.
Transforming sports betting into swap-type instruments is a legal masterpiece that opens the door to the unlimited expansion of prediction markets. If subsequent courts uphold this interpretation, the line between the stock exchange and the casino will be permanently blurred. This industry is ceasing to be a niche curiosity for crypto enthusiasts and is becoming a full-fledged, albeit controversial, element of the global financial system, protected by political influence and federal regulations.
Maintaining the current course by federal courts will lead to the marginalization of state gaming commissions. In the face of support from key administration figures and the growing capitalization of markets like Kalshi, state gambling regulations may become an anachronism. The real challenge, however, will not be the fight against "illegal gambling," but the attempt to master a giant speculative market where military and political information becomes a billion-dollar commodity, available to a narrow elite with knowledge inaccessible to the general public.