On September 10, 2025, a three-judge panel of the Third Circuit heard oral arguments in Kalshi’s lawsuit against New Jersey.
The state’s gaming regulator wants to stop Kalshi from offering sports-based “event contracts” to Garden State residents. Kalshi says those contracts are regulated by the CFTC and should be treated like financial products, not state-licensed bets.
Judges pressed both sides, and early reports suggest they were skeptical of New Jersey’s position. A ruling will come later, but the stakes are high for the state’s sports betting industry.
What the Judges Focused On
At the hearing, the panel spent time on a simple question: What are these contracts? Kalshi calls them “swaps,” a type of financial instrument covered by federal law. New Jersey calls them sports wagers that must follow state rules.
One judge noted that Congress wrote a broad definition for “swaps” and hinted that, if that definition sweeps in sports outcomes, it may be Congress’s job—not the court’s—to narrow it. Observers in the courtroom said the panel repeatedly pushed the state to explain why federal commodities law doesn’t apply here.
This matters because Kalshi operates as a federally regulated Designated Contract Market. If the contracts are swaps, federal rules would control and state gambling laws could be preempted for trading on that exchange.
If the contracts are wagers, New Jersey can keep treating them like sports betting and require a state license. The judges also asked about practical issues, like how a national exchange could comply with New Jersey’s in-state betting limits, which are designed for local sportsbooks, not financial markets.
Why This Matters for New Jersey Bettors and Sportsbooks
Back in March 2025, New Jersey’s Division of Gaming Enforcement sent Kalshi a cease-and-desist letter over its sports markets. A federal judge later issued a preliminary injunction that blocks the state from enforcing that letter while the case proceeds. New Jersey appealed, which is why the Third Circuit heard arguments this week.
If the state wins on appeal, regulators could again try to stop Kalshi’s sports contracts from reaching New Jersey users. If Kalshi wins, the injunction stays in place, and the company has a stronger case that federal law preempts state enforcement for trades on its exchange.
For fans and operators, the outcome could shape how “prediction” products fit alongside sportsbooks. Kalshi’s markets are yes/no contracts that settle on a sports outcome—like which team advances or how many games a series lasts—with buyers and sellers trading shares.
There’s no “house,” and trades clear through a federally supervised clearinghouse. NJ sportsbooks, by contrast, take bets, set odds, and must follow New Jersey’s licensing, geofencing, and college-betting restrictions.
A win for Kalshi would not rewrite those rules for sportsbooks; it would decide who regulates exchange-traded sports outcomes.
What happens next? The panel will issue an opinion in the coming weeks or months. The losing side could ask the full court to rehear the case or seek Supreme Court review. Until then, New Jersey operators should track the decision, because it may affect compliance planning, product roadmaps, and any partnerships with prediction platforms.
For everyday New Jersey sports betting fans, nothing changes immediately—but the ruling could expand or limit access to federally regulated sports-outcome markets in New Jersey.
