Appeals Courts Reach Conflicting Interpretations of Same Law

Third Circuit and Ninth Circuit read the same statute and reached opposite conclusions

A disagreement that precise does not resolve quietly. It goes to Washington, or it hardens into a patchwork that nobody — not Kalshi, not the states, not the CFTC — can actually operate inside.

New Jersey Attorney General Jennifer Davenport stood in front of reporters Tuesday and said the quiet part plainly: her state has already asked the Supreme Court to take the question. Forty states joined that filing. That is not a coalition assembled around a weak argument. That is a majority of the country telling the Court that something has broken in how federal derivatives law and state gambling law interact, and that the break is load-bearing.

The mechanism underneath this is straightforward, even if the litigation is not. The Third Circuit found that the Commodity Exchange Act preempts state regulation of Kalshi's sports event contracts. The Ninth Circuit found, in a parallel dispute, that states retain the authority to prohibit such contracts under their own gambling laws. Two federal appellate courts, reading Dodd-Frank, found different answers to the same question about the same product. That split is exactly the condition under which the Supreme Court takes a case. Davenport knows this. Her Tuesday press conference was not a legal filing — it was a signal that New Jersey intends to keep the pressure on until the Court acts.

The reporting on Kalshi's state-by-state situation tends to treat each enforcement action as a discrete event. Ohio cease-and-desist. Utah lawsuit. Missouri order. New Jersey Supreme Court petition. The framing makes it look like a series of skirmishes. I think that misreads the structure. What is happening is a coordinated stress test of the federal preemption argument — applied simultaneously across jurisdictions with different constitutional postures, different courts, and different enforcement tools. Utah's constitution has prohibited gambling since statehood. Ohio's legislature cannot pass two bills before December. New Jersey is asking the highest court in the country to rule. These are not the same fight. They are the same question, asked in every forum available, because the answer has not yet been forced.

Kalshi's preemption argument is genuinely strong in the Third Circuit's jurisdiction. Jacki McGavick said it again Tuesday: federally regulated exchange, CFTC oversight, no single state should have a veto. That argument has won in Philadelphia. It has not won everywhere, and it has not been tested in the Supreme Court. The gap between "winning in one circuit" and "winning as national law" is where the company is currently living, and that gap is expensive. Utah is claiming fees between thirty and sixty million dollars from a single state's user base. Multiply that exposure across forty states whose attorneys general just told the Supreme Court they believe they have enforcement authority, and the preemption argument becomes not just a legal position but a survival condition.

The consensus read is that Kalshi weathers the state actions until federal litigation resolves. I am less confident in the timeline than that read implies. The states are not waiting. And the Court's decision to grant or deny certiorari on New Jersey's petition will tell us more about this industry's next five years than any single state court ruling has.