Judge Sides with Kalshi in Sports Prediction Market Dispute in New Jersey

At the core of the dispute is the question of whether Kalshi's products should be regulated by federal agencies or state-level authoritiesImage Source: Shutterstock.com

A federal court in New Jerseyhas given Kalshi, a prediction market operator, a big legal victory. The court granted a preliminary injunctionto stop state-level attempts to block the company’s sports-related event contracts. This ruling comes after the New Jersey Division of Gaming Enforcement (NJDGE)issued a cease-and-desist order in March. The NJDGE claimed Kalshi was running unlicensed sports betting operations.

Court Affirms CFTC’s Role in Sports Market Regulation

The heart of the argument is about who has the power to regulate Kalshi’s products– the federal government or state authorities. Kalshi, which the Commodity Futures Trading Commission (CFTC)oversees at the federal level, said its contracts on sports event results are real financial tools that CFTCrulescontrol. However, the NJDGEclaimed these markets break New Jersey’s laws against sports betting.

Judge Edward Kielof the US District Courtagreed with Kalshi. He said the contracts in question belong under the CFTC’s watch, as reported by Covers. He did not buy the NJDGE’s argumentthat sports results have no financial or business impact. Instead, he stressed that these markets do have economic value and are not outside what the CFTCcan oversee.

This is the second time a federal court has ruled in Kalshi‘s favor, after a similar result in Nevadaearlier this year. Both cases boost Kalshi’s legal position as it protects its right to run nationwide without states meddling, especially in jurisdictions where sports betting is controlled or limited.

Kalshi’s Legal Battles Highlight Unresolved Tensions Between State and Federal Oversight

Kalshihad claimed that the NJDGE’s actionscould have hurt its business operations and image, a point the judge seemed to agree with when granting the injunction. Judge Kiel’s decisionrecognized the wider regulatory uncertainty around prediction marketsand pointed out that an ongoing federal review is needed to set clearer limits.

The fight is not done yet. Kalshiis facing similar resistance in other states, too. Maryland and Ohio have also told them to stop operations. Legal experts think these cases might set the rules for how prediction markets are controlled in the US.

The CFTC, which keeps an eye on derivatives markets, has been trying to come up with one set of rules for this fast-changing industry. However, they called off a planned talk about sports-related contracts. They did not say why or when they might reschedule it.

As Kalshikeeps offering contracts across all 50 states, including areas where traditional sports betting is not allowed, the company maintains that federal oversight by the CFTC frees it from state gambling laws. With millions in state tax revenue on the line, legal fights over prediction markets do not seem close to ending anytime soon.