Third Circuit rules states can regulate Kalshi prediction markets

A federal appeals court ruled against Kalshi on Friday, holding that states retain authority to regulate prediction markets even where the platform holds federal CFTC designation as a designated contract market.

The Third Circuit's decision directly contradicts the position Kalshi has maintained in litigation across multiple states: that CFTC oversight preempts state gambling law entirely. The court found that federal designation does not strip states of their regulatory power over contracts that fall within traditional gambling definitions.

The ruling lands after Kalshi already lost six federal judges in its en banc petition and withdrew from Montana rather than litigate to a ruling. A Third Circuit holding that state authority survives federal designation is structurally different from those setbacks. It is precedent, not a procedural loss or a negotiated exit.