TRENTON—The U.S. Court of Appeals for the Third Circuit issued a 2-1 decision on April 6, affirming that the Commodity Futures Trading Commission holds exclusive jurisdiction over sports-related event contracts. The ruling in KalshiEX LLC v. Flaherty (No. 25-1922) bars the New Jersey Division of Gaming Enforcement from enforcing cease-and-desist orders against Kalshi, a CFTC-registered designated contract market offering wagers on professional sports outcomes.
The dispute originated March 27, 2025, when Mary Jo Flaherty, interim director of the New Jersey Division of Gaming Enforcement, issued a cease-and-desist letter to Kalshi demanding cessation of sports trading. The letter cited violations of the New Jersey Sports Wagering Act and constitutional prohibitions on collegiate sports betting. Attorney General Jennifer Davenport, who assumed office January 20, 2026, inherited the defense of this enforcement action following the departure of former Attorney General Matthew Platkin.
Legal Analysis and Circuit Split
On April 28, 2025, U.S. District Judge Edward S. Kiel granted Kalshi's motion for preliminary injunction, finding a reasonable likelihood of success on preemption grounds and setting a $100,000 bond. The Third Circuit heard oral arguments September 10, 2025, and affirmed the injunction April 6, 2026. Judges David J. Porter and Michael A. Chagares formed the majority, with Judge Jane R. Roth dissenting.
The majority held that sports-related event contracts constitute "swaps" under the Commodity Exchange Act (7 U.S.C. § 1a(47)(A)(ii)) because they involve payments dependent on "the occurrence... of an event or contingency associated with a potential financial, economic, or commercial consequence." The court applied both field preemption and conflict preemption, finding the CEA's comprehensive regulatory structure occupies the field of designated contract market trading and that New Jersey's licensing requirements obstruct Congress's objective of uniform federal regulation.
Judge Roth dissented, arguing the majority's interpretation would subject "anything from bingo games to ping-pong matches" to CFTC jurisdiction and noted Kalshi's products are "virtually indistinguishable from... DraftKings and FanDuel." The majority declined to address whether CFTC Rule 40.11(a)(1), which prohibits gaming contracts on designated contract markets, undermines the preemption theory, leaving this question for the District Court on full merits adjudication.
The ruling creates a circuit split with the District of Maryland, which denied a preliminary injunction in a parallel Kalshi action in August 2025, and the Ninth Circuit, which is scheduled to hear consolidated oral arguments April 16, 2026.
Stakeholder Positions and State Responses
CFTC Chairman Michael S. Selig stated April 2, 2026, that the agency "will aggressively defend its jurisdiction" and "defend market participants against overzealous state regulators." He also announced federal complaints against Arizona, Connecticut, and Illinois to enjoin state enforcement actions. CFTC spokesperson Brooke Nethercott affirmed that "Congress gave the CFTC exclusive jurisdiction over trades on DCMs."
Illinois Governor J.B. Pritzker criticized the CFTC's actions through a spokesperson: "The Trump Administration is carrying water for companies driving well-documented and lucrative insider trading schemes. This is a blatant attempt to sidestep the State's jurisdiction and put profits ahead of consumers."
New Jersey Attorney General Jennifer Davenport's criticized the ruling, stating that "we profoundly disagree with today's decision." She added, "we'll continue standing with our colleagues fighting off similar challenges in their States, and we're evaluating all options in our case."
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Sources
• Holland & Knight, "Federal Appeals Court: CFTC Jurisdiction Over Sports Event Contracts Likely Exclusive" (April 7, 2026)
• Nate Raymond, Reuters, "New Jersey cannot regulate Kalshi's prediction market, US appeals court rules" (April 6, 2026)
• David Purdum, ESPN, "Kalshi scores an appeals court win over New Jersey regulators" (April 6, 2026)
• U.S. Court of Appeals for the Third Circuit, KalshiEX LLC v. Mary Jo Flaherty, No. 25-1922, Court Opinion (April 6, 2026)
• U.S. District Court for the District of New Jersey, KalshiEX LLC v. Flaherty, No. 1:25-cv-02152, Opinion by Judge Edward S. Kiel (April 28, 2025)
• Commodity Futures Trading Commission, Press Release No. 9206-26, " CFTC Sues Trio of States to Reaffirm its Exclusive Jurisdiction Over Prediction Markets" (April 2, 2026)
• Michael S. Selig, The Wall Street Journal, "States Encroach on Prediction Markets" (February 17, 2026)
• Paul Weiss, "A Divided Third Circuit Holds That the CFTC Has Exclusive Jurisdiction Over Sports-Related Event Contracts" (April 7, 2026)