US Appeals Court Rules New Jersey Cannot Ban Kalshi Prediction Markets

Kalshi, a prediction-market platform regulated by the U.S. Commodity Futures Trading Commission, offers event contracts tied to outcomes including sporting events. Michigan authorities contend those products amount to sports betting and must comply with the state’s licensing and gambling rules. The dispute is significant because it tests whether federal derivatives oversight preempts state enforcement, an issue that could shape prediction markets nationwide as a potential U.S. Supreme Court battle approaches.

A Michigan court has ordered Kalshi to continue blocking sports prediction-market trading for users in the state, extending a temporary restriction imposed in June. The injunction keeps the sports contracts unavailable while litigation proceeds or until a higher court intervenes. If Kalshi violates the order, it could face fines of as much as $500,000 for each day of noncompliance, sharply raising the stakes in its fight with Michigan regulators.

Kalshi, approved by the Commodity Futures Trading Commission in 2020 as a designated contract market, argues its sports-event contracts are federally regulated derivatives rather than wagers subject to state gambling laws. The dispute matters beyond New Jersey: a ruling for Kalshi could sharply limit states’ power to license, restrict or prohibit sports betting while allowing prediction-market platforms to operate nationwide under CFTC oversight.

New Jersey Attorney General Jennifer Davenport and Division of Gaming Enforcement acting director Mary Jo Flaherty filed a 332-page petition for certiorari on Sept. 2, 2026. They asked the Supreme Court to reverse an April 2-1 ruling by the Third Circuit that favored Kalshi. The filing points to a circuit split after the Ninth Circuit ruled on Aug. 28 that federal commodities law did not displace Nevada’s authority over sports wagering.

Kalshi operates a designated contract market regulated by the Commodity Futures Trading Commission and argues that its event contracts are federally supervised derivatives rather than wagers subject to state licensing. The dispute tests where financial regulation ends and gambling oversight begins, with major implications for prediction-market operators, state consumer-protection regimes and the CFTC’s claim to exclusive jurisdiction under the Commodity Exchange Act.

On Aug. 28, 2026, a unanimous three-judge panel of the U.S. Court of Appeals for the Ninth Circuit held that Kalshi had not shown the Commodity Exchange Act was likely to preempt Nevada gaming laws. The court affirmed the dissolution of an injunction covering sports-event contracts and sent questions involving election contracts back to the district court. No monetary damages were awarded. The decision conflicts with the Third Circuit’s approach, prompting the CFTC to signal a potential Supreme Court fight.

Kalshi is a CFTC-registered designated contract market that lets users trade event contracts tied to sports, elections and other outcomes. Its legal strategy rests on federal pre-emption: the company argues the Commodity Exchange Act gives the Commodity Futures Trading Commission exclusive authority over its exchange, while states contend much of the activity is gambling subject to local licensing and consumer-protection laws. The outcome will determine whether prediction markets can operate under one national framework or face a state-by-state patchwork.

On Aug. 13, King County Superior Court Judge John McHale ordered Kalshi to block Washington users from most contracts, requiring initial IP and residency geofencing by Aug. 19 and a multi-source system by Sept. 2. Kalshi sought reconsideration on Aug. 20, citing Washington’s decision not to enforce equivalent restrictions against Crypto.com pending appeal. Separately, 44 state attorneys general challenged the CFTC’s 267-page proposed rule after comments closed July 27. The CFTC invoked emergency authority on Aug. 11 to keep Kalshi operating amid New York’s July 31 suit, which seeks more than $36 billion in damages.

Kalshi, designated as a contract market by the Commodity Futures Trading Commission in 2020, lets users trade contracts tied to outcomes ranging from sports and elections to economic data. Washington state argues those products amount to unlicensed gambling, while Kalshi says federal derivatives law gives the CFTC exclusive authority. The dispute is important because its outcome could determine whether state gambling rules can constrain a fast-growing industry built around federally regulated event contracts.

King County Superior Court Judge John McHale on Aug. 13 ordered Kalshi to stop accepting new positions in most markets by Aug. 19 and implement geofencing by Sept. 2. Noncompliance could trigger penalties of $120,000 a day. The order allows trading tied to commodities, climate, economics and finance to continue, while restricting categories including sports. Washington Attorney General Nick Brown filed the underlying lawsuit on March 27, accusing Kalshi of violating the state Gambling Act and Consumer Protection Act.

Kalshi operates a CFTC-designated contract market where users trade event contracts tied to sports, politics and other outcomes. The company says those products are derivatives governed by the federal Commodity Exchange Act, while New York treats its sports contracts as unlicensed gambling subject to state safeguards, taxes and age limits. The dispute has become a direct test of whether the Commodity Futures Trading Commission’s asserted exclusive jurisdiction over national derivatives markets preempts state gambling enforcement.

On Aug. 11, 2026, the CFTC invoked emergency authority after KalshiEX notified it of a “market emergency,” ordering the exchange to keep operating in line with the Commodity Exchange Act’s Core Principles. New York Attorney General Letitia James had sued on July 31, seeking a temporary restraining order barring Kalshi from offering all event contracts nationwide and more than $36 billion in damages. The action marked the agency’s first use of such emergency powers since 1980 and sharply escalated the federal-state jurisdictional fight.

Kalshi is a Commodity Futures Trading Commission-regulated designated contract market where users trade yes-or-no event contracts that settle at a maximum of $1. The New York State Gaming Commission argues that sports contracts constitute gambling subject to state law. The dispute centers on whether the federal Commodity Exchange Act preempts state enforcement and could also affect the platform’s cost of operating across state lines.

On July 7, 2026, U.S. District Judge Analisa Torres of the Southern District of New York denied Kalshi’s motion for a preliminary injunction. She found that the company had not sufficiently shown that federal law preempted New York’s gambling laws and that the associated compliance costs did not constitute irreparable harm. Kalshi filed a notice of appeal the same day, and the case entered the U.S. Court of Appeals for the Second Circuit on July 8 under docket number 26-1835.

Kalshi is a prediction market regulated by the U.S. Commodity Futures Trading Commission that allows users to trade contracts on event outcomes. The company argues that its products are financial swaps, while Michigan considers its sports contracts to be unlicensed online gambling. The dispute centers on whether federal financial regulation can preempt state gambling laws and also raises questions about consumer protection and gambling tax revenue.

On June 29, 2026, Ingham County Circuit Court Judge Rosemarie Aquilina granted Michigan Attorney General Dana Nessel's request for a 14-day temporary restraining order barring Kalshi from offering or promoting sports contracts to people in the state. The platform must use third-party geolocation technology that complies with state rules to block users. Violations carry a fine of $120,000 per day, and the order was originally set to remain in effect through July 13.

Kalshi is a prediction-market platform regulated by the U.S. Commodity Futures Trading Commission (CFTC) that allows users to trade contracts based on sporting-event outcomes. Illinois has subjected such products to state sports-betting restrictions, sparking a dispute over whether federal derivatives oversight preempts state intervention. The outcome could also affect how prediction markets operate across states.

Kalshi recently sued Illinois officials to challenge a provision in the state's newly enacted budget bill that is scheduled to take effect on July 1. The company argues that restrictions on sporting-event contracts encroach on the CFTC's exclusive regulatory authority. It is seeking to block enforcement, saying the provision would immediately restrict its products and cause irreparable harm that monetary damages could not adequately remedy.

Kalshi is a designated contract market regulated by the US Commodity Futures Trading Commission, or CFTC, and argues that event contracts tied to sports, elections and other outcomes are swaps governed by the federal Commodity Exchange Act. The Nevada Gaming Control Board contends that Kalshi is offering gambling without a license. The dispute centers on whether the CFTC’s exclusive jurisdiction preempts state gaming laws and could determine whether prediction markets can operate under uniform nationwide rules.

On March 19, 2026, the US Court of Appeals for the Ninth Circuit denied Kalshi’s request for an emergency administrative stay, leaving intact a March 2 order returning the case to state court. On March 20, Nevada First Judicial District Court Judge Jason Woodbury issued a 14-day temporary restraining order. He extended it on April 3, finding that an event contract was functionally similar to gambling by comparing it with an identical $100 wager on a baseball game.