A pair of US court rulings has exposed a growing judicial divide over the status of prediction markets, with Kalshi securing a federal-level win in New Jersey while facing a setback in Nevada.
In Nevada, Judge Jason Woodbury granted the state a preliminary injunction, extending a temporary restraining order that prevents Kalshi from offering sports, election and entertainment contracts to users. The restriction, now running until April 17th, marks the first time Kalshi has complied with a state-level enforcement action.
The court appeared unconvinced by Kalshi’s argument that federal law pre-empts state regulation, with Woodbury concluding that prediction market contracts are effectively indistinguishable from sports betting and therefore prohibited under Nevada law. The decision was welcomed by the Nevada Gaming Control Board, which said it would continue to enforce state gaming rules.
Days later, Kalshi secured a more favourable outcome in the 3rd Circuit Court of Appeals, which upheld a lower court ruling in its favour against New Jersey. In a 2-1 decision, the panel found that Kalshi had demonstrated a reasonable likelihood of success in arguing that the Commodity Exchange Act pre-empts state-level gambling regulation.
Writing for the majority, Judge David Porter held that Kalshi’s event contracts fall under the exclusive jurisdiction of the CTFC, as they are traded on a federally licensed designated contract market. The ruling reinforces the federal framework governing derivatives, even as states seek to classify similar products as gambling.
The dissenting opinion from Judge Jane Roth took a contrasting view, arguing that Kalshi’s offerings amount to sports betting in substance and should therefore be subject to state oversight.
The split decisions highlight the increasingly complex legal terrain surrounding prediction markets, with parallel cases now advancing across state and federal courts. The Nevada proceedings are set to move to the 9th Circuit Court of Appeals, where Kalshi will again test its federal pre-emption argument.
The broader conflict continues to escalate. The CTFC has recently moved to defend its authority more aggressively, launching legal action against multiple states while also initiating a formal rulemaking process on prediction markets.
Under Chairman Michael Selig, the regulator has signalled a willingness to assert exclusive jurisdiction over event-based contracts, setting up a direct confrontation with state gaming frameworks. For operators and regulators, the implications are significant. The outcome of these cases will help determine whether prediction markets are governed as financial instruments at federal level or absorbed into state-by-state gambling regimes, a distinction that could reshape the competitive landscape across US betting and trading verticals.
