In the space of a single week, the same business model received a landmark legal endorsement from a federal appeals court in Philadelphia and a preliminary injunction from a state court in Nevada.
That is the contradictory landscape now surrounding Kalshi, the prediction market platform whose legal battles are shaping what may become the most consequential regulatory dispute in US iGaming history.
The outcome of these cases will determine whether prediction markets sit inside the gambling industry’s regulatory perimeter — or outside it entirely, protected by federal commodity law.
The Third Circuit Court of Appeals delivered the ruling that Kalshi needed most on Monday, April 7, finding by a 2-1 vote that New Jersey gaming regulators have no authority over the sports-related event contracts that Kalshi offers its users. Writing for the majority, Circuit Judge David Porter was direct:
“Kalshi’s sports-related event contracts are swaps traded on a CFTC-licensed DCM, so the CFTC has exclusive jurisdiction.” The decision marked the first time any federal appeals court had ruled on the central jurisdictional question dividing prediction market platforms from state gambling authorities, and Kalshi CEO Tarek Mansour described it as “a big win for the industry and millions of users.”
The backdrop to that ruling is a regulatory war that has escalated quickly across multiple US states. New Jersey had issued Kalshi a cease-and-desist order in early 2025, arguing that its sports-related contracts violated state gambling laws that include restrictions on collegiate sports wagering. Kalshi’s counter-argument — that its contracts qualify as “swaps” under the Commodity Exchange Act, placing them exclusively within the CFTC’s jurisdiction — is the same argument the CFTC itself has been advancing in parallel litigation.
The Trump administration’s regulatory regulator has filed lawsuits against Arizona, Connecticut and Illinois to prevent those states from pursuing what it characterises as unlawful interference with federally licensed prediction market operators. “Congress gave the CFTC exclusive jurisdiction over trades on DCMs, and this decision affirms the goals of Congress,” said CFTC spokesperson Brooke Nethercott.
Not everyone on the Third Circuit panel agreed. Dissenting judge Jane Richards Roth made the gambling industry’s core argument in plain terms, writing that Kalshi’s offerings were “virtually indistinguishable from the betting products available on online sportsbooks, such as DraftKings and FanDuel.”
New Jersey Attorney General Jennifer Davenport issued a statement calling the majority opinion “deeply flawed” and warning that it allows companies to offer sports gambling without following the consumer protection frameworks that licensed sportsbooks must adhere to, including age verification requirements. New Jersey is now evaluating whether to seek en banc review before the full Third Circuit, which would involve all the court’s active judges.
The Nevada picture tells a different story. A state judge announced Friday that he would issue a preliminary injunction blocking Kalshi from offering event-based contracts that conflict with Nevada’s gaming statutes, extending a temporary restraining order that had originally been issued on March 20. Judge Jason Woodbury rejected Kalshi’s federal pre-emption argument, ruling that the contracts were functionally indistinguishable from licensed sportsbook activity.
“Prediction markets, to the extent they facilitate unlicensed gambling, are illegal in Nevada, and we have a statutory duty to protect the public,” said Nevada Gaming Control Board chairman Mike Dreitzer. The CFTC has also filed its own lawsuit in Nevada to challenge the board’s position — meaning the federal regulator is simultaneously fighting state authorities in at least four jurisdictions.
Washington state has opened yet another front. After issuing guidance in December 2025 that prediction market platforms violate its prohibition on internet gambling outside tribal lands, Washington filed a formal lawsuit against Kalshi in March 2026. Robinhood — which offers Kalshi event contracts through its brokerage platform — filed a preemptive federal lawsuit against Washington state regulators, arguing federal pre-emption again. The state called Kalshi “just a bookie with a fancy name.”
The 9th Circuit Court of Appeals in San Francisco is due to hear arguments in a parallel dispute in the coming days, which will add yet another appellate voice to a legal conversation that has split courts in opposite directions without resolution.
The implications for the broader iGaming industry are substantial. If the CFTC pre-emption argument ultimately prevails across the appellate courts and potentially the Supreme Court, prediction market platforms would operate in a federal regulatory lane entirely separate from the state-licensed sportsbook framework that DraftKings, FanDuel and BetMGM inhabit. That would create a two-tier structure in which some forms of sports wagering carry state consumer protections and licensing requirements while others do not — a result that licensed operators in the traditional sports betting market find deeply troubling.
More than 10 bills have been introduced in Congress this year targeting prediction market regulation, including a bipartisan measure that would prohibit CFTC-registered exchanges from listing contracts that resemble sports betting or casino products. The courts are producing answers, but they are pointing in different directions. The definitive ruling, whenever it arrives, will reshape the competitive map of American online gambling more profoundly than any regulatory decision in years.
