April 6 (Reuters) - A federal appeals court on Monday ruled that New Jersey gaming regulators cannot prevent Kalshi from allowing people in the state to use its prediction market to place financial bets on the outcome of sporting events.
A three-judge panel of the Philadelphia-based 3rd U.S. Circuit Court of Appeals sided 2-1 with Kalshi in finding that the Commodity Exchange Act preempts state law and governs the sports-related event contracts it offers on its platform.
The ruling marked a major victory for Kalshi, which along with other prediction market operators has found itselfat the center of an escalating battle over the ability of state gaming regulators to police activity on their platforms.
Such states have argued that companies like Kalshi are operating in their jurisdictions without a license and in violation of state gaming laws, including prohibitions against people under 21 from placing wagers.
Those states include New Jersey, which last year sent Kalshi a cease-and-desist letter stating that Kalshi’s listing of sports-related event contracts on its platform violated state gambling laws that prohibit betting on collegiate sports.
Kalshi sued, arguing that it was registered as a designated contract market with the U.S. Commodity Futures Trading Commission and that its events contracts are a type of "swap" governed by the Commodity Exchange Act.
Kalshi did not immediately respond to a request for comment.
(Reporting by Nate Raymond in Boston; Editing by Chizu Nomiyama and Andrea Ricci )
