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Read Full BioKalshi has a court hearing in Philadelphia in its case against New Jersey, and the company claims the foundations of the global financial system are at stake.
The United States Court of Appeals for the Third Circuit will hear the arguments of Kalshi’s lawyers and representatives of New Jersey’s gambling regulators.
Ahead of the hearing, Sara Slane, Head of Corporate Development at Kalshi, wrote on LinkedIn, “Prediction markets are under threat — and so is the stability of the global financial system.”
She went on to add that if state regulators, such as those in New Jersey, succeed in stopping Kalshi’s expansion into sports markets, “they won’t just strangle a growing industry — they could open the door to states picking and choosing which futures and derivatives contracts are legal.”
She added: “That puts at risk the $730 trillion global derivatives market that underpins the economy.”
Kalshi’s lawyers may put forth similar arguments in court, while New Jersey will argue that the sports offerings are unlicensed betting. Both sides will have roughly 15 minutes to make their case.
Judge Decisions Pivotal in Battle for Legal Status
Kalshi received a positive ruling from a New Jersey judge in April as the company was granted a preliminary injunction to continue operations in New Jersey. This put a pause on the cease-and-desist letter the state had sent to Kalshi.
When siding with the prediction market platform, Judge Edward S. Kiel noted: “I am persuaded that Kalshi’s sports-related event contracts fall within the CFTC’s exclusive jurisdiction and am unconvinced by defendants’ arguments to the contrary.”
Since then, a judge in Maryland denied Kalshi’s request for the same reprieve, while a judge in Nevada denied its motion to stay discovery last week.
In her LinkedIn post, Slane went on to stress the importance of the hearing in the 3rd Circuit, stating: “The case, now before the 3rd Circuit Court of Appeals, will decide whether prediction markets remain under the exclusive oversight of the CFTC — as Congress intended — or whether states can rewrite the rules of global finance.”
She added: “The stakes couldn’t be higher. Allowing states to chip away at federal preemption would unwind hard-won post-crisis reforms and invite chaos in U.S. and global markets.”
It is questionable whether restricting Kalshi’s expansion into sports markets would “invite chaos.” However, a judgment either way will undoubtedly have consequences on the prediction market and sports betting industries.
A definitive ruling is unlikely to come anytime soon. Legal gaming expert Marc Dunbar said he expects the case to end up in the Supreme Court, and it could be two years before there is a real resolution.
Kalshi Expands Into Pickleball
In the meantime, Kalshi continues to expand its sports markets. The platform is seeing record levels of trading on its football markets after activating event contracts on regular-season NFL games for the first time.
The company’s first experiment with sports markets came on the Super Bowl at the start of the year, but it now offers trading on almost all sports.
This week, it announced a partnership with the Pro Pickleball Association. Kalshi posted the news on X:
The markets are unlikely to see the same level of trading as the NFL, but it is the first sports league to partner with Kalshi officially.
Other organizations, including the NBA, NCAA, MLB, NFL, and NHL, have all expressed concern about sports prediction markets.
Company Also Announces Partnership With Statscore
In addition, Kalshi also announced a partnership with data provider Statscore. A press release stated: “The collaboration will focus on premier sports such as football, tennis, basketball, ice hockey, baseball, Formula 1 and American football.”
Slane added: “Together, we are equipping Kalshi users with the ability to see live updates of in-game activity, which will help enhance the user experience.”
The deal could see Kalshi ramp up its in-play markets throughout the football season. Only adverse court rulings will slow down the company’s expansion.
