What happened

A federal appeals court ruled on 6 April that Kalshi, a CFTC-registered prediction market, can legally offer contracts on NFL, NBA and MLB outcomes without state interference. The Third Circuit held in a 2-1 decision that the Commodity Exchange Act creates a federal regulatory floor that preempts state gambling classifications.

New Jersey had argued that sports event contracts are illegal gambling under state law. The court disagreed, finding that if a platform complies with federal trading regulations, states cannot override that authorisation.

Why it matters

The ruling threatens the $44 billion US sports betting industry built on state-by-state licensing. Prediction markets processed roughly $200 billion in contract volume over the past year, with Kalshi alone generating $25 million in fees during a four-day March Madness stretch.

The other side

Six state attorneys general — including New Jersey, Pennsylvania and Michigan — have signalled they may seek Supreme Court review. The NFL, NBA and MLB have formally requested that prediction market operators remove contracts they consider “objectionable bets,” citing game integrity concerns.

On 16 April, Ninth Circuit judges hearing a parallel case out of Nevada asked pointed questions suggesting they may rule differently. Gaming industry lawyers say a split between the Third and Ninth Circuits would almost certainly produce a Supreme Court petition.

The regulatory picture

The CFTC’s own rulemaking on event contracts remains open, with a public comment period running until 30 April. The commission must decide by the third quarter of 2026 whether to formally approve or prohibit sports-related event contracts.

CFTC Chairman Selig testified before Congress on 17 April, outlining proposed rules that would create a new regulatory category for sports event contracts — distinct from both traditional derivatives and state-regulated gambling.

What happens next

If the Ninth Circuit rules against Kalshi as expected, a circuit split would be established by mid-2026. A Supreme Court petition could land on the docket by early 2027. The outcome will determine whether a federally chartered prediction market can operate nationwide regardless of state gambling laws, or whether states retain the power to ban sports-outcome contracts within their borders.