New Jersey Steps Back From Rehearing In Kalshi Case

New Jersey will not seek a rehearing in its legal dispute with Kalshi, following a federal appeals court ruling that restricted the state’s authority over the company’s operations.

U.S. Gaming Law and Sports Betting Attorney, Daniel Wallach described the decision as notable, pointing to the split nature of the ruling. He stated that a dissenting judge could have supported a rehearing at the same level. Instead, the state is considering a direct appeal to the Supreme Court, with the filing timeline still open to extension.

The case forms part of a broader debate over how prediction markets should be classified within the US regulatory system.

Court ruling classifies contracts under federal oversight

Earlier in April, the federal appeals court upheld an injunction in favour of Kalshi. The ruling prevents New Jersey regulators from applying state gambling laws to the platform.

The court stated that Kalshi’s event-based contracts qualify as financial instruments. This places them under the jurisdiction of the Commodity Futures Trading Commission rather than state-level gaming laws. 

New Jersey had argued that the contracts resemble sports betting products and should fall under state regulations.

States continue to challenge prediction platforms

Despite the ruling, several U.S. states remain opposed to prediction market platforms. Arizona, Connecticut and Illinois have taken enforcement steps over the past year, including cease-and-desist orders and regulatory actions.

Arizona has escalated its response by filing criminal charges, alleging that such platforms operate outside established laws.

At the same time, the CFTC has moved to defend its authority. The regulator has initiated legal action against states attempting to impose their own rules on prediction market operators, arguing that these products fall within its jurisdiction.

Split decision highlights structural divide

The appeals court decision was not unanimous. While the majority classified event contracts as financial instruments, the dissenting opinion argued that they are effectively indistinguishable from sports bets.

Industry analysis reflects a similar divide. Alice Li of Foresight Ventures pointed to differences in the functions of each model and not their scale. Prediction markets convert real-world outcomes into tradable contracts tied to probability and information flow, while sports betting is built around wagering for entertainment.

Research from Foresight Ventures indicates strong growth in the sector, with activity concentrated on Kalshi and Polymarket. Despite overlapping use cases, both models are expected to develop along separate paths, with prediction markets expanding into areas such as economics and policy while betting remains focused on entertaining customers. 

Kalshi has won a victory for prediction markets in New Jersey. The state will not be filing for a rehearing after the federal court’s ruling. So top platforms in the US operate under the CFTC’s regulatory framework.