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New Jersey Attorney General Jennifer Davenport is urging the US Court of Appeals for the Third Circuit to follow a growing line of state court rulings rejecting Kalshi’s claim that federal law allows it to offer sports-related prediction markets without state approval.
In a letter filed last week obtained by PlayNJ, New Jersey informed the court that a Massachusetts judge has barred Kalshi from offering sports-related event contracts in that state unless it obtains a sports betting license, which directly undercuts Kalshi’s legal arguments in New Jersey’s ongoing case.
Massachusetts decision adds momentum for states
The Massachusetts Superior Court ruling, issued Jan. 20, granted the state a preliminary injunction preventing Kalshi from offering sports contracts without licensure. The court also denied Kalshi’s attempt to dismiss the case on federal pre-emption grounds.
New Jersey told the Third Circuit that the Massachusetts ruling mirrors earlier decisions in Nevada and Maryland, leaving the New Jersey District Court as the only court to accept Kalshi’s argument that federal derivatives law overrides state gambling regulation.
According to the filing, the Massachusetts court explicitly rejected the idea that Congress intended to “federalize” sports wagering when it expanded the Commodity Futures Trading Commission’s authority over derivatives markets.
A New Jersey judge awarded Kalshi a preliminary injunction to continue operating, and the state has appealed.
Kalshi’s federal pre-emption argument rejected
Kalshi operates a CFTC-regulated exchange that allows users to trade contracts tied to real-world events. While the company began with economic indicators, it expanded into sports markets in 2025, offering contracts that mirror traditional bets on game outcomes, point spreads, totals, and player performance.
Kalshi does not dispute that those products qualify as sports wagering under state law or that it lacks state licenses. Instead, it has argued that the Commodity Exchange Act gives the CFTC exclusive jurisdiction, preventing states from enforcing their sports wagering laws.
The Massachusetts court rejected that position, finding no evidence Congress intended to displace state authority over gambling – a power the court described as a core state police function. The judge also pointed to provisions in federal law that explicitly preserve the role of state law in determining whether certain activities are lawful.
Why New Jersey says the ruling matters
In its letter, New Jersey emphasized that the Massachusetts court rejected both “field pre-emption” and “conflict pre-emption” theories raised by Kalshi. Requiring state licensure, the court said, does not interfere with federal derivatives regulation or frustrate Congress’ goals.
Instead, the ruling found that state licensing requirements serve public health and consumer protection interests, including responsible gambling safeguards and oversight.
Implications for New Jersey and beyond
The New Jersey AG is asking the Third Circuit to take note of the growing consensus among courts as it considers Kalshi’s appeal. If upheld, the state argues, the Massachusetts decision strengthens the ability of states like New Jersey to enforce their sports wagering laws against unlicensed prediction markets.
For regulators nationwide, the filing underscores a broader message: federal registration alone does not provide a free pass around state sports wagering rules.
