Kalshi wins injunction against NJDGE in landmark prediction market case
A federal court has sided with prediction markets platform Kalshi, blocking New Jersey regulators from stopping the company’s sports-related “event contracts” in the state.
Prediction markets vs. sports betting rules
The conflict began when the New Jersey Division of Gaming Enforcement (NJDGE), the state’s gaming watchdog, sent Kalshi a cease-and-desist letter in late March 2025. The NJDGE argued that Kalshi’s contracts, which allow users to trade on the outcomes of events like sports games, were essentially unauthorised sports betting. They claimed these offerings violated the New Jersey Sports Wagering Act and the state constitution, which tightly control sports betting. The NJDGE demanded Kalshi immediately stop offering these contracts to New Jersey residents and threatened enforcement, including potential fines up to $100,000.
Read more: Kalshi’s legal woes deepen as CFTC roundtable hangs in balance – SigmaPlay
Kalshi’s defense: Federal regulation takes precedence
Kalshi, a New York-based financial services company, quickly filed a lawsuit. Their core argument: We are not a state-level betting operation, but a federally regulated exchange. It operates as a designated contract market (DCM), certified by the U.S. Commodity Futures Trading Commission (CFTC) in 2020. The CFTC is the federal agency overseeing derivatives, including “event contracts”.
Kalshi argued that under the federal Commodity Exchange Act (CEA), particularly as amended by the Dodd-Frank Act, the CFTC has exclusive jurisdiction over these types of contracts traded on its exchange. Therefore, Kalshi contended, state regulators like the NJDGE simply don’t have the authority to interfere. They pointed out that the CFTC itself has a process to review event contracts and can prohibit those deemed against the public interest (e.g., involving illegal activity, gaming, war, etc.), but had not done so for Kalshi’s sports contracts.
Read more: CFTC regulates us, won’t stop until they ask us to: Kalshi co-founder
Court’s decision: A win for Kalshi
U.S. District Judge Edward S. Kiel reviewed the arguments and granted Kalshi’s request for a preliminary injunction. This court order temporarily prevents the NJDGE and other named New Jersey officials from enforcing the cease-and-desist letter while the lawsuit continues.
Judge Kiel found Kalshi had shown a “reasonable chance” of ultimately winning the case based on the principle of federal preemption – the idea that federal law overrides state law in certain areas.
Why Kalshi won this Round: Judge Kiel’s reasoning
- Exclusive federal jurisdiction: Judge Kiel agreed with Kalshi’s interpretation of the CEA, stating, “I am persuaded that Kalshi’s sports-related event contracts fall within the CFTC’s exclusive jurisdiction…”. He found the NJDGE’s arguments trying to limit the CFTC’s scope unconvincing.
- Financial consequence of sports: The NJDGE argued sports events lack the “potential financial, economic, or commercial consequence” required for contracts to fall under CFTC jurisdiction. Judge Kiel disagreed, referencing the clear economic impact of sports on television, advertising, and local economies.
- Pre-emption: The judge leaned towards “field pre-emption,” suggesting Congress intended the CFTC to occupy the entire regulatory field for contracts traded on designated exchanges like Kalshi, leaving no room for state rules like New Jersey’s betting laws in this specific context. He found this consistent with a similar ruling favouring Kalshi against Nevada regulators earlier in the month.
- Irreparable harm: The judge agreed that forcing Kalshi to comply or face penalties would cause irreparable harm, including significant financial costs (potentially millions for geolocation technology ) and damage to its reputation and user confidence.
What this means for Kalshi (and New Jersey)
The preliminary injunction maintains the status quo. Kalshi can continue offering its sports-related event contracts to users in New Jersey without facing immediate state enforcement action. However, the company had to post a $100,000 bond, an amount that Judge Kiel considered appropriate as security in case it was later found that the injunction was wrongly granted. This amount mirrors the potential state fine.
The underlying legal battle over whether New Jersey can regulate these specific contracts will continue.
Broader implications: More legal challenges
This ruling reinforces Kalshi’s position as it faces similar challenges elsewhere. The company noted this decision aligns with its previous victory in Nevada and expressed hope for a swift resolution in ongoing cases, including one against Maryland regulators.
Sara Slane, Kalshi’s Head of Corporate Development, stated, “We are grateful for the court’s attention and well-reasoned opinion… Kalshi is firmly on the right side of the law.”
