# KalshiEX v. Flaherty ***KalshiEX LLC v. Flaherty*, No. 25-1922 (3d Cir. Apr. 6, 2026)** is the only federal appeals ruling so far to side with prediction markets against a state. It held that [[Kalshi]] was likely to win its argument that the Commodity Exchange Act preempts New Jersey's gambling laws for sports contracts traded on a [[CFTC]]-registered exchange. Two other circuits have since ruled the opposite way, and New Jersey has asked the Supreme Court to settle it. Mary Jo Flaherty is the interim director of New Jersey's Division of Gaming Enforcement. In the Supreme Court, New Jersey is the petitioner. The question the case presents is the one that decides how big the prediction-market industry gets: **is a bet on a football game a "swap"?** If it is, the CFTC has exclusive jurisdiction and every state gambling law falls away, including the bans in California and Texas. If it isn't, Kalshi and [[Polymarket]] are unlicensed sportsbooks in most of the country. ## The Third Circuit's ruling - **Panel:** Judge David J. Porter for the majority, joined by Chief Judge Michael A. Chagares. **Judge Jane R. Roth dissented.** - **Holding:** Kalshi showed a reasonable probability of success, so the preliminary injunction against New Jersey stands. Sports event contracts count as swaps because their payout depends on an event with "potential financial, economic, or commercial consequence." Federal regulation of exchange trading is comprehensive enough to occupy the field, and letting states enforce gambling law would recreate the patchwork Congress meant to eliminate. - **Posture:** This was a preliminary ruling, not a final judgment. The case went back to the district court. ## The circuit split | Court | Case | Date | Result | |---|---|---|---| | **3d Cir.** (New Jersey) | *KalshiEX LLC v. Flaherty*, No. 25-1922 | Apr 6, 2026 | **For Kalshi** (2–1). Preemption likely. | | **9th Cir.** (Nevada) | *KalshiEX, LLC v. Assad*, No. 25-7516 | Aug 28, 2026 | **For the state.** Sports contracts are not swaps; no preemption. Opinion by Judge Ryan D. Nelson, with Judges Bridget S. Bade and Kenneth K. Lee; no dissent. | | **6th Cir.** (Ohio, Tennessee) | *KalshiEX LLC v. Schuler*; *KalshiEX LLC v. Orgel*, Nos. 26-3196/5235 | Sept 25, 2026 | **For the states.** Not swaps; and even if they were, no express or implied preemption. Opinion by Judge Julia Smith Gibbons, with Judges Clay and Bloomekatz; no dissent. | | **4th Cir.** (Maryland) | *KalshiEX LLC v. Martin*, No. 25-1892 | Argued May 2026 | Pending. | The Ninth Circuit's opening line set the tone: "That which we call a rose by any other name would smell as sweet." Calling a sports bet a contract does not change what it is. The **Sixth Circuit** held that a qualifying event must be "intrinsically associated with a financial consequence such that we can reasonably understand why hedging financial risk or ascertaining pricing information for the occurrence of that event would be desired and beneficial." It then quoted Kalshi against itself: in earlier litigation, Kalshi had conceded that its sports contracts have "no inherent economic significance." District courts are split too. In June 2026 Judge Paul Maloney (W.D. Mich.) denied [[Polymarket]] an injunction against Michigan on the same reasoning as the Ninth and Sixth Circuits. ## Up to the Supreme Court New Jersey filed its petition for certiorari on **September 2, 2026**, signed by interim gaming director Flaherty and Attorney General Jennifer Davenport. As Front Office Sports noted, both appeals came up on preliminary injunctions, not final judgments, so filing a petition does not guarantee the Court takes this case; it could wait for a cleaner one. The [[CFTC]] has said the split "calls out for resolution by the Supreme Court" (see [[Kalshi]]). **Docket status (as of October 6, 2026), from the Court's own docket:** | Date | Entry | |---|---| | Sept 2, 2026 | Petition filed; response due October 8 | | Sept 8, 2026 | Docketed as **No. 26-299**, *Mary Jo Flaherty, Interim Director, New Jersey Division of Gaming Enforcement, et al. v. KalshiEX, LLC* | | Sept 22, 2026 | Kalshi's request granted: response deadline extended to **November 9, 2026**. Amicus brief filed by the National Council of Legislators from Gaming States | | Oct 2, 2026 | Amicus brief filed by the International Association of Gaming Regulators and the North American Gaming Regulators Association | The petition was not on the Court's September 29 "long conference" list. Nothing can happen before Kalshi responds, and the Court could also ask the Solicitor General for the government's view, which would add months. That would put the CFTC's own position before the Court. **Three petitions.** On September 10, 2026, [[Robinhood]] asked the Supreme Court to review the Ninth Circuit's Nevada ruling, which had been argued together with the Kalshi and Crypto.com cases: [[Robinhood Derivatives v. Dreitzer]], No. 26-338, with Nevada's response due November 13. On September 11, Crypto.com's exchange (North American Derivatives Exchange, now operating as OG.com) filed its own: [[North American Derivatives Exchange v. Nevada]], No. 26-344, response due November 16. New Jersey's petition counts at least **39 lawsuits across 20 states** over these contracts. Separately, **44 states** signed a July comment letter opposing the platforms' position on the CFTC's proposed event-contract rule (DeSilva Law Offices). Kalshi separately asked the Ninth Circuit for rehearing en banc. Sports-betting lawyer Daniel Wallach called the two filings a "likely tag-team strategy." ## The regulator as litigant Full state-by-state treatment, with dockets and rulings: [[CFTC v. Arizona]]. The CFTC is not neutral here. In April 2026, under Chairman [[Michael Selig]], it sued **Illinois, Arizona, Connecticut and New York** in federal court, asking for declarations that it has exclusive jurisdiction over event contracts and injunctions barring the states from enforcing their gambling laws against registered exchanges. By late June it had filed **nine** such suits in all; RotoWire's tracker lists the other five as New Mexico, Minnesota, Rhode Island, Wisconsin and Kentucky. On October 2, 2026 Judge Martha Pacold (N.D. Ill.) gave Kalshi, Coinbase and the CFTC a partial preliminary injunction against Illinois. See [[Michael Selig]]. The agency is litigating the same theory Kalshi is, and two of three circuits have now rejected it. ## Why it matters - **[[Federal Preemption]] as industry strategy.** The argument is the crypto playbook applied to gambling: get a federal regulator to bless the product, then use that blessing to override state law. - ***[[Murphy v. NCAA]]* in reverse.** In 2018 the Supreme Court held that Congress could not stop states from legalizing sports betting. Kalshi's theory would mean Congress, through the 1974 Commodity Exchange Act as amended by Dodd-Frank, had already stopped states from banning it. - **The money.** Sports are most of Kalshi's roughly $37–40 billion in monthly volume. The [[American Gaming Association]] estimates more than $500 million (more than $1 billion by its May 2026 tracker) in state sports-betting taxes already diverted. See [[Sports Betting]]. ## See also - [[Robinhood Derivatives v. Dreitzer]] · [[North American Derivatives Exchange v. Nevada]] - [[Kalshi]] · [[Polymarket]] · [[CFTC]] · [[Michael Selig]] - [[Sports Betting]] · [[Prediction Markets]] · [[Federal Preemption]] · [[Murphy v. NCAA]] - [[CFTC v. Arizona]] · [[American Gaming Association]] · [[Coalition for Prediction Markets]] · [[CME Group]] - [[Legal Cases Hub]]