CFTC Wins Court Battle: Kalshi’s Prediction Market Unleashed for Sports Contracts!

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U.S. Court Affirms CFTC Authority Over Kalshi Contracts

Key Highlights

  • A U.S. Court of Appeals has ruled in favor of prediction market platforms.
  • Kalshi has been involved in the legal battle for about a year before this outcome.
  • The decision may allow platforms to expand sports and event-based contracts.

The Third Circuit Court of Appeals today decided that the Commodity Futures Trading Commission (CFTC) is the only agency with the authority to regulate event contracts bought and sold on Kalshi’s exchange.

As an analyst, I’m following a recent court decision where, by a 2-1 vote, the judges decided to allow Kalshi to continue operating in New Jersey. Essentially, the court blocked New Jersey from enforcing its gaming laws against Kalshi’s trading platform, which is already registered with the CFTC and deals in contracts based on sports and other events. This upholds a previous, temporary injunction that was in place.

A recent court decision in the case of KalshiEx LLC v. Flaherty and others is a significant step forward for businesses involved in prediction markets.

CFTC chairman reacts to the ruling

CFTC Chair Michael S. Selig called the decision a significant win for federal regulation of prediction markets.

He expressed approval of the court’s ruling in a post on X (formerly Twitter) on Monday, emphasizing that the agency is the sole regulator for specific types of financial markets known as designated contract markets.

Today’s ruling by the Third Circuit Court of Appeals confirms that Congress intended the @CFTC to be the sole regulator of trading on designated contract markets. I commend the Court for defending federal law and dismissing the New Jersey Division of Gaming Enforcement’s effort to…

— Mike Selig (@ChairmanSelig) April 6, 2026

Background of the case 

Prediction markets let people buy and sell contracts based on what they think will happen in real-world events – things like elections, sports games, or current events.

Starting in early 2025, Kalshi began offering contracts based on the outcomes of sporting events. However, New Jersey’s gaming regulators, led by Mary Jo Flaherty and with support from the state Attorney General, considered these contracts to be illegal online sports betting.

Last March, the state sent Kalshi a notice demanding they stop offering certain contracts to New Jersey residents, arguing these contracts broke the state’s laws regarding sports betting and the state constitution.

I’m following the Kalshi situation closely, and they’re fighting back against New Jersey’s order in federal court. Basically, they’re arguing that because they’re a regulated exchange – specifically, designated by the CFTC as a contract market – federal law should take precedence over New Jersey’s rules about what they’re allowed to offer. They believe the federal Commodity Exchange Act covers their contracts, and that’s why the state shouldn’t be able to interfere.

The district court sided with my argument and issued a preliminary injunction, which temporarily halted New Jersey from enforcing the policy. The state wasn’t finished, though – they appealed to the Third Circuit Court of Appeals, and that appeal ultimately led to the decision we received today.

Impact on prediction markets

As an analyst, I see this ruling as providing much-needed legal clarity for CFTC-registered platforms operating in the Third Circuit – that’s New Jersey, Pennsylvania, Delaware, and the U.S. Virgin Islands. It significantly reduces the immediate risk of states stepping in with cease-and-desist orders or other enforcement actions targeting contracts related to sports events, which we’ve been seeing across the country.

This decision offers more clarity for prediction markets, solidifying the existing federal rules for commodity trading.

What comes next 

Kalshi and other platforms where you can predict the outcome of events are now able to offer more options for sports and events, thanks to their success in establishing reliable markets.

Despite the recent ruling, the legal situation isn’t fully settled. New Jersey could still ask for further consideration of the case, potentially through an appeal to the Supreme Court or a rehearing by the current court.

What happens next will probably depend on the outcomes of lawsuits happening elsewhere, and on whether the CFTC creates new rules for event contracts.

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2026-04-06 21:09