Third Circuit Backs Kalshi in 2-1 Ruling, Putting Sports Contracts Under CFTC Control
Updated
Updated · Forbes · May 13
Third Circuit Backs Kalshi in 2-1 Ruling, Putting Sports Contracts Under CFTC Control
10 articles · Updated · Forbes · May 13
A divided Third Circuit panel held 2-1 that Kalshi is likely to prevail in arguing its sports-related event contracts are swaps under the Commodity Exchange Act, keeping New Jersey from enforcing state gambling laws against them.
The majority said those contracts fit the CEA’s definition because sports outcomes can carry economic consequences for stakeholders such as sponsors, broadcasters, franchises and communities, triggering the CFTC’s exclusive jurisdiction over swaps.
Judge Roth dissented that Kalshi’s products are effectively sportsbook wagers and remain subject to state police powers, warning the majority’s logic could sweep in even small private bets as federally regulated swaps.
The ruling leaves Kalshi’s CFTC-licensed exchange free, for now, to offer contracts tied to sports outcomes and novelty markets such as how many Knicks playoff games Timothée Chalamet attends.
A Ninth Circuit panel hearing related Kalshi, Robinhood and Crypto.com cases has already signaled skepticism, raising the prospect of a circuit split and eventual Supreme Court review.
Will a looming Supreme Court battle let federal regulators control the multi-billion dollar sports betting industry?
As federal and state regulators clash, are sports prediction markets the future of finance or just gambling in disguise?
KalshiEX v. Flaherty: How the Third Circuit’s 2026 Ruling Redefined Federal Authority Over Sports Event Contracts
Overview
On April 6, 2026, the United States Court of Appeals for the Third Circuit issued a landmark decision in KalshiEX LLC v. Flaherty, marking the first time a federal appellate court addressed whether sports event contracts traded on CFTC-regulated exchanges fall under state gaming laws. This decision signaled a significant shift toward federal primacy, providing crucial clarity and direct operational certainty for companies like KalshiEX LLC. As a result, these companies can now offer their products without being subject to varying state gaming rules, streamlining operations and setting a precedent that could influence similar cases nationwide.