Third Circuit Upholds Injunction Protecting Kalshi Prediction Markets from New Jersey Law in April 2026

The United States Court of Appeals for the Third Circuit issued a published opinion on 6 April 2026 in KalshiEx, LLC v. Mary Jo Flaherty, No. 25-1922, affirming the district court's grant of a preliminary injunction restraining New Jersey state officials from enforcing state law against Kalshi's sports-related event contracts listed on its Commodity Futures Trading Commission-licensed designated contract market. The court held that the Commodity Exchange Act, 7 U.S.C. s. 2(a)(1)(A), field-preempts New Jersey state law to the extent it purports to regulate trading on a designated contract market under the Act.

The controlling authority is Section 2(a)(1)(A) of the Commodity Exchange Act, which grants the CFTC exclusive regulatory jurisdiction over transactions in interstate commerce involving commodity contracts and swaps. The Third Circuit concluded that Kalshi's sports-related event contracts constitute swaps under the Act. Because the Act grants the CFTC exclusive jurisdiction over trading on designated contract markets, field preemption applies to the specific domain of regulating such trading. The court distinguished the field from the broader subject of gambling — a traditionally state-regulated area — finding that New Jersey's regulatory interest in sports betting does not override federal preemption of trading on a CFTC-licensed exchange.

Operators of CFTC-licensed prediction market platforms offering event contracts may now rely on the Third Circuit's holding to resist state-level enforcement in the Third Circuit's jurisdiction (New Jersey, Pennsylvania, Delaware, and the Virgin Islands). The decision reinforces that state authorities — including state gambling regulators — cannot regulate trading activity on a designated contract market for activities the CFTC has licensed. Market participants and platform operators outside the Third Circuit should note that the decision is persuasive authority, not binding, in other circuits.

The court's field preemption analysis does not address the two savings clauses in Section 2(a)(1)(A) that preserve certain state regulatory authority over areas not superseded. The CFTC has a pending advance notice of proposed rulemaking on event contract derivatives traded on prediction markets, cited in the opinion as Prediction Markets, 91 Fed. Reg. 12516 (proposed March 16, 2026), which may further define the scope of CFTC jurisdiction and the remaining space for state regulation. Open questions remain regarding the geographic scope of federal preemption and the application of this holding in other federal circuits.

Our firm advises prediction market operators, event contract platforms, and digital wagering businesses on CFTC licensing, Commodity Exchange Act preemption strategy, and state law compliance across US jurisdictions. We also maintain a dedicated partner network for US derivatives regulation and gaming law. Contact us to assess your regulatory exposure in light of this decision. Our work covers matters including: prediction markets, CFTC licensing, Commodity Exchange Act preemption, event contracts, designated contract market compliance, sports betting regulation, and KalshiEx implications.

Source: KalshiEx, LLC v. Mary Jo Flaherty, No. 25-1922, United States Court of Appeals for the Third Circuit (April 6, 2026), https://www.courtlistener.com/opinion/10838220/kalshiex-llc-v-mary-jo-flaherty/ (confirmed 22 April 2026); Prediction Markets, 91 Fed. Reg. 12516 (March 16, 2026) (CFTC ANPRM referenced in opinion).

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