A New Jersey federal judge has granted prediction market operator Kalshi a preliminary injunction that prevents state regulators from blocking the company's sports-related event contracts while litigation continues.
U.S. District Judge Edward S. Kiel ruled on Wednesday that the New Jersey Division of Gaming Enforcement (DGE) cannot enforce its cease-and-desist order against Kalshi, which had begun offering sports contracts in January. The decision marks Kalshi's second significant legal victory this month, following a similar ruling in Nevada.
"I am persuaded that Kalshi's sports-related event contracts fall within the CFTC's exclusive jurisdiction and am unconvinced by defendants' arguments to the contrary," Judge Kiel wrote in his decision, referring to the federal Commodity Futures Trading Commission.
At the heart of the case is the legal principle of preemption — whether federal law supersedes state authority in regulating Kalshi's activities. The judge concluded that because Kalshi operates as a CFTC-certified "designated contract market," its operations fall under exclusive federal jurisdiction.
New Jersey regulators had argued that Kalshi's sports contracts violated both the New Jersey Sports Wagering Act, which requires companies to obtain a license to offer sports betting, and the state constitution, which prohibits betting on New Jersey college teams and college games played in the state.
Kalshi's sports-related contracts allow users to trade on outcomes such as which team will advance in a college basketball tournament round or who will win a professional hockey championship.
The company, represented by former New Jersey Attorney General Gurbir S. Grewal and other attorneys from Milbank, maintained that its offerings are regulated financial products, not gambling, and that the CFTC has exclusive authority to regulate them.
Judge Kiel rejected the state's argument that "sporting events are without potential financial, economic, or commercial consequence," noting Kalshi's references to "the economic impact of sporting events in television, advertising, and local communities."
In granting the injunction, Kiel determined that Kalshi would suffer irreparable harm without court intervention, facing "credible threat of civil and criminal liability" from New Jersey regulators.
The judge also noted that the legal uncertainty "imperils the reputation Kalshi has cultivated over several years" and pointed out that one of Kalshi's business partners had already backed away from listing Kalshi event contracts in New Jersey due to regulatory concerns.
"The balancing of the factors here caution me to keep the toothpaste in the tube," Kiel wrote, indicating that maintaining the status quo while the case proceeds is the most prudent approach.
Kalshi's fight against state regulators extends beyond New Jersey and Nevada. The company has received cease-and-desist letters from at least six states, including Maryland, Illinois, Montana, and Ohio, and recently filed a lawsuit against the Maryland Lottery and Gaming Commission.
"Once again, the decision is consistent with what we have stated from the beginning: Kalshi is firmly on the right side of the law," said Sara Slane, head of corporate development for Kalshi, in an emailed statement. "We look forward to a swift resolution of these cases and will continue to educate regulators and the public on the benefits of prediction markets and the stringent federal regulations under which we operate."
The CFTC, which had planned a roundtable discussion on the regulatory treatment of sports prediction markets, recently canceled the event. The agency has not commented publicly on when it might be rescheduled.
New Jersey has the option to appeal Kiel's order to the U.S. Court of Appeals for the Third Circuit, but the state's Attorney General's office declined to comment on pending litigation.