Kalshi Files New Brief in New Jersey Lawsuit

Another day, another legal headline involving the prediction market operator Kalshi.  

The prediction market company Kalshi filed a brief in the U.S. Court of Appeals for the Third Circuit on Thursday. In that brief, Kalshi argues that since it's federally regulated by the Commodity Futures Trading Commission (CFTC), the state of New Jersey is barred from regulating Kalshi’s sporting event contracts.  

Key Insights: 

• Kalshi started offering sports-related event contracts in January 2025. 
• Several states, including New Jersey, issued cease-and-desist letters to Kalshi, alleging that its de facto sports betting contracts violated state gambling laws.  
• As a federally regulated firm, Kalshi’s brief claims that it is not bound by state laws.  

In its latest filing, Kalshi claims that "allowing states to use their gambling laws to regulate such trading would nullify the CFTC’s authority and undermine the nationwide uniformity necessary for derivatives markets to work.” The brief further argues that "compliance with both the CFTC’s and New Jersey’s requirements would be impossible for Kalshi.”  

If Kalshi successfully argues its sports-event contracts are not bound by state law, it could significantly upend the legalized sports betting sector across the United States. Since the U.S. Supreme Court effectively lifted the ban on sports betting in 2018, more than three dozen states have invested in the regulatory infrastructure needed to support legal sports betting. Should Kalshi succeed, that infrastructure may have been all for naught. And worse, states could start to see their sports betting tax revenues evaporate.  

Background

The New Jersey Department of Gaming Enforcement (NJDG) issued a cease-and-desist letter to Kalshi back in March. The interim director Mary Jo Flaherty cited Kalshi for listing "unauthorized sports wagers,” in general. She also specifically noted that, "Kalshi is currently offering unauthorized sports wagering to New Jersey residents on collegiate sporting events occurring in New Jersey in violation of the New Jersey Constitution.” 

Within days of receiving the cease-and-desist order, Kalshi sued the NJDG. The prediction market firm sought a temporary restraining order and preliminary injunction to keep operating until the matter was resolved in court.  

• https://www.covers.com/industry/kalshi-files-new-brief-in-new-jersey-lawsuit