A three-judge panel of the U.S. Third Circuit Court of Appeals ruled 2-1 on April 6 in favour of Kalshi, upholding a preliminary injunction that blocks New Jersey from applying its state gaming regulations to Kalshi's sports event contracts. The decision is the first ruling from a U.S. federal appellate court on the core jurisdictional question dividing prediction market platforms and state gambling regulators across the country.

Federal Law Wins the Argument, for Now

The majority opinion, written by Judge David J. Porter, held that the Commodity Exchange Act (CEA) gives the Commodity Futures Trading Commission (CFTC) exclusive authority over swaps traded on a CFTC-licensed Designated Contract Market (DCM). Kalshi received DCM status from the CFTC in 2020, which allows it to list event contracts under federal oversight. The court concluded that Kalshi's sports-related contracts qualify as swaps under the CEA, and therefore federal jurisdiction applies.

"The Act preempts state laws that directly interfere with swaps traded on DCMs," Porter wrote. "Kalshi's sports-related event contracts are swaps traded on a CFTC-licensed DCM, so the CFTC has exclusive jurisdiction."

The ruling matters commercially because sports event contracts represent roughly 90 percent of Kalshi's total trading volume. The company launched those contracts on January 24, 2025, and received cease-and-desist letters from Nevada, New Jersey, and Maryland within weeks, each state arguing Kalshi was operating an unlicensed sportsbook. The sports contract dispute follows a legal pattern established in October 2024, when Kalshi won a separate federal challenge that legalised election-based trading in the United States.

A Sharp Dissent and a Competing Ruling Elsewhere

Judge Jane R. Roth disagreed sharply. In her dissent, she wrote that Kalshi's offerings are "virtually indistinguishable from the betting products available on online sportsbooks, such as DraftKings and FanDuel," and accused the majority of permitting "acts of alchemy that transmute its products from sports gambling to futures trading."

That view found support the same week in Ohio, where Chief Judge Sarah D. Morrison ruled that "the number of points scored in the Huskies-Bobcats game does not" affect commodity prices, and therefore the contract fell under state gaming law rather than federal derivatives regulation. The two rulings now sit in direct conflict.

New Jersey Attorney General Jennifer Davenport said the state "profoundly" disagreed with the Third Circuit decision and is reviewing options including an en banc rehearing (a request for the full appeals court to reconsider the decision) or a petition to the U.S. Supreme Court. CFTC Chair Michael Selig has characterised the wave of state enforcement actions as a "power grab," placing the federal regulator firmly on the side of exclusive federal jurisdiction.

Kalshi CEO Tarek Mansour called the outcome "a big win for the industry."

Nearly 50 Cases Still Active, Supreme Court Likely Ahead

Nearly 50 active cases are now pending, with conflicting district court decisions in Nevada, Ohio, Massachusetts, and Tennessee. Over 36 state attorneys general have filed briefs opposing the CFTC's claim to exclusive jurisdiction. Legal analysts expect the Supreme Court to take up the underlying question as early as 2027 or 2028.

Congress is also moving. Democratic Senators Richard Blumenthal and Andy Kim have introduced legislation that would set a minimum age of 21 for prediction market participants, prohibit insider trading in event contracts, and explicitly grant states regulatory authority over these platforms. Its status in the legislative process had not been confirmed at the time of publication.

What This Means for On-Chain Markets and Global Users

The prediction market sector has grown sharply over the past year. Monthly trading volume across the category reached approximately $21 billion in January 2026, up from around $1.2 billion in early 2025, according to TRM Labs data. Polymarket, a major decentralised platform, recorded a single-day volume of $425 million on February 28, 2026, and reported roughly 840,000 active wallets in February. Its total value locked (TVL) reached approximately $250 million in Q4 2025.

The Third Circuit ruling applies specifically to Kalshi as a centralised, CFTC-licensed entity. Decentralised platforms such as Polymarket, Augur, and LIMITLESS operate outside that framework. However, any ruling that categorises sports event contracts as regulated derivatives rather than gambling products lowers the legal risk profile for the broader sector and could ease the path for on-chain platforms seeking institutional access in regulated markets. The CFTC has separately flagged a "heightened potential for manipulation" in contracts tied to individual athlete performance, a regulatory caveat that adds important nuance to its otherwise expansive jurisdictional claims over event contracts.

Outside the U.S., regulators are moving in the opposite direction. Argentina blocked Polymarket in March 2026 after courts applied an "economic reality" test that classified its contracts as unlicensed betting. Romania blacklisted Polymarket following an election-related market in 2025; France has separately restricted access through its own regulatory process. The dissenting language in the New Jersey case appears to echo the same economic reality reasoning applied in those jurisdictions.

In South Asia, the regulatory picture is similarly unsettled. India has developed a "game of skill" framework that governs fantasy sports platforms such as Dream11 and MPL, and fintech regulators there face the unresolved question of how to distinguish speculative event derivatives from prohibited gambling products. Pakistan's existing crypto prohibition adds a further layer of complexity for any platform seeking access in that market. In Nigeria and Kenya, where crypto adoption is driven partly by mobile money infrastructure and sports-adjacent financial products have established user bases, the gambling-versus-derivatives distinction carries real commercial stakes. Sub-Saharan Africa has seen stablecoin volumes rise 180 percent year over year, according to TRM Labs, meaning the infrastructure for these products already exists. But without a local equivalent of the CFTC framework, platforms face the same jurisdictional uncertainty that Kalshi has been fighting in U.S. courts for more than a year.

The Third Circuit decision is a meaningful data point, but with conflicting rulings piling up and a Supreme Court review looking increasingly likely, the legal framework for prediction markets in the United States remains unresolved.