The U.S. Court of Appeals for the Third Circuit ruled in favor of prediction market platform Kalshi in a lawsuit it filed against New Jersey state regulators.

On April 6, blockchain outlet BeInCrypto reported that the court found federal oversight takes priority on whether states can separately block or restrict the operation of prediction markets regulated at the federal level.

The issue was whether Kalshi’s service should be viewed under a state-level gambling regulatory framework or within the federal financial regulatory system. Kalshi argued that individual states have no authority to block or restrict the service because it is already overseen by the Commodity Futures Trading Commission (CFTC). New Jersey regulators countered that prediction markets linked to elections in particular could be subject to state law, including gambling-related restrictions.

The case escalated in September 2025 when Kalshi filed a lawsuit against Mary Jo Flaherty (메리 조 플래허티), an official at a New Jersey state regulatory agency. As state-level constraints affected its operations, the dispute turned into a legal clash over whether federally regulated prediction markets can be offered freely nationwide. The Third Circuit’s decision is interpreted as a finding that prediction markets can operate within constitutional bounds and as support for the primacy of federal oversight in this area.

Kalshi also welcomed the decision. Kalshi said, "The Third Circuit ruled in Kalshi’s favor," adding, "This is a big win for the industry and millions of users." It also said, "People use prediction markets because they are fairer and more transparent, and because they reward those who get it right," and added, "Free markets work. We should keep it that way."

Prediction markets trade contracts tied to the outcomes of future events such as election results or economic indicators, and promote the idea that they gather information through price formation. Concerns have also been raised about the potential for manipulation and the blurring of the boundary between financial markets and gambling.

With the ruling, Kalshi will retain a legal basis to continue expanding its platform and product offerings, and it leaves the implication across the industry that the court has signaled prediction markets could be seen not as "gambling operations" but as a legitimate financial instrument.