Kalshi Wins Second Legal Victory as Judge Backs CFTC

Prediction market platform Kalshi has secured its second major legal victory, this time in New Jersey, where a federal court issued a preliminary injunction preventing state regulators from halting the company’s operations. The ruling temporarily shields Kalshi from enforcement actions by the New Jersey Division of Gaming Enforcement (NJDGE) and affirms the Commodity Futures Trading Commission’s (CFTC) jurisdiction over the company’s offerings.

Kalshi had taken legal action following a cease-and-desist letter it received in March from New Jersey regulators. That letter accused the company of violating state sports betting laws and operating illegally without proper licensure. In response, Kalshi argued that its event-based contracts—ranging from sports outcomes to political forecasts—are not gambling products but rather fall under the purview of federal financial regulation overseen by the CFTC.

Judge s Federal Authority and Warns of Business Harm

U.S. District Judge Edward Kiel, who presided over the case, agreed with Kalshi’s argument and issued a preliminary injunction that halts state enforcement efforts for now. In his written decision, Kiel stated, “I am persuaded that Kalshi’s sports-related event contracts fall within the CFTC’s exclusive jurisdiction and am unconvinced by defendants’ arguments to the contrary.”

The judge pointed out that New Jersey’s claim—that sports outcomes don’t qualify as instruments of financial consequence—was unconvincing. Instead, he determined that Kalshi’s contracts did bear economic or commercial impact, bringing them under federal regulatory oversight.

Judge Kiel also stressed the potential for lasting harm to Kalshi if the state’s actions were allowed to proceed. He cited a specific incident in which a business partner withdrew for Kalshi’s offerings in New Jersey following the state’s legal threat. “Kalshi has identified harms to its reputation and goodwill that are both likely without injunctive relief and not able to be remedied following trial,” the ruling noted.

In evaluating the legal merits, Kiel concluded that Kalshi was likely to succeed in showing that New Jersey’s enforcement was preempted by federal law. As he wrote in the ruling, “The balancing of the factors here caution me to keep the toothpaste in the tube.”

Wider Legal Campaign Targets Multiple States

This is not Kalshi’s first courtroom success. The New Jersey injunction mirrors an earlier win in Nevada, where the company mounted a similar challenge after receiving another cease-and-desist letter. The company has also initiated litigation in Maryland, as part of a broader effort to fend off what it views as state overreach.

So far, six states—including Ohio, Maryland, Nevada, and New Jersey—have issued cease-and-desist notices to Kalshi and similar platforms, asserting that the operation of event contracts amounts to unlicensed sports betting. Kalshi has pushed back, stating that its products are federally compliant and not designed as conventional gambling mechanisms.

Meanwhile, the CFTC, which has classified Kalshi as a Designated Contract Market, had planned a roundtable to evaluate prediction market oversight but canceled the event without rescheduling, leaving regulatory clarity in limbo.

Impact on Prediction Markets and State Gambling Models

The latest ruling has broader implications for the legal status of prediction markets in the United States. Kalshi’s contracts have recently leaned heavily into sports—ing for about 75% of weekend trading volume, according to The Early Line newsletter. The NBA playoffs, in particular, have driven a surge in contract activity, although other areas like single-game baseball wagers remain relatively modest in scale.

Kalshi’s business model—offering contracts on diverse outcomes ranging from celebrity showdowns to papal succession—positions it outside traditional sports betting frameworks. However, this also places it in direct competition with state-licensed sportsbooks like DraftKings and FanDuel, which contribute significant tax revenue to states. In 2024, New Jersey’s online sports betting sector alone brought in $138.3 million in tax income.

The possibility of prediction markets operating free from state oversight poses a competitive threat to those entrenched operators and raises difficult questions for regulators and lawmakers.

Uncertain Legal Landscape Ahead

Despite Kalshi’s recent court victories, the issue is far from resolved. Federal statutes such as the Wire Act and CFTC Rule 40.11 leave ambiguity around what kinds of contracts are permissible. The courts are now tasked with interpreting these rules in ways that could shape the future of event-based markets in the U.S.

While Kalshi’s ability to continue business in New Jersey is secured for the moment, the broader question of state versus federal authority remains. With ongoing legal challenges in Maryland and potential actions looming in other states, the company’s legal odyssey is far from over.

As the rulings accumulate, however, a pattern is beginning to emerge—courts appear increasingly willing to uphold federal jurisdiction, granting Kalshi space to argue that its platform belongs in the realm of regulated financial products, not gambling.

Source:

Kalshi Secures Second Legal Win as Judge Backs CFTC Authority in New Jersey, news.worldcasinodirectory.com, April 29, 2025.