A federal court in New Jersey has granted Kalshi’s motion for a preliminary injunction, temporarily blocking the state from enforcing its gambling laws against the federally regulated prediction market operator.
The ruling gives Kalshi an early win as it defends its sports event markets against regulatory scrutiny across multiple states.
Judge Edward S. Kiel issued the decision on April 28, 2025, finding that Kalshi demonstrated a reasonable likelihood of success in its claim that the Commodity Exchange Act (CEA) preempts New Jersey’s enforcement efforts. The court concluded that Kalshi’s sports event contracts likely qualify as “swaps” under the CEA, placing them under the exclusive jurisdiction of the Commodity Futures Trading Commission (CFTC).
Kalshi must post a $100,000 bond, the maximum penalty under New Jersey gaming law, to secure the preliminary injunction (or argue why that amount is inappropriate).
Why the court ruled for Kalshi
The court treated the case as a straightforward preemption dispute.
The CEA grants the CFTC exclusive authority over swaps and futures contracts traded on designated contract markets (DCMs). Kalshi, a CFTC-regulated DCM, argued that its sports contracts are federally supervised swaps exempt from state gambling laws. Judge Kiel agreed they had shown a reasonable likelihood of success on this point, citing the statute’s text giving the CFTC exclusive jurisdiction over regulation of DCMs.
The court granted credence to Kalshi’s argument that sporting events like the Masters Tournament or March Madness involve “potential financial, economic, or commercial consequences,” which would qualify these contracts as swaps. Advertising revenue, broadcast rights, and related economic effects were cited as tangible examples.
The decision comes on the heels of a preliminary injunction Kalshi secured earlier this month in Nevada.
With two federal courts finding it reasonable that the CEA broadly preempts state-level gambling laws, a growing legal trend favoring federally regulated event markets is emerging.
What a preliminary injunction means
The injunction does not end the case. It prevents New Jersey from enforcing state gaming laws against Kalshi while litigation continues.
To win preliminary relief, Kalshi needed to show a credible likelihood of success — not prove its case definitively.
Kalshi seeks preliminary and permanent injunctions and a declaratory judgment establishing that the CEA preempts New Jersey’s gambling laws as applied to its event markets. Winning preliminary relief is an important early step, but Kalshi must still prevail on the full merits to secure permanent protection and a declaration that the CEA does, in fact, preempt state gaming laws.
Irreparable harm and balancing the equities
The court found Kalshi would face irreparable harm without an injunction. New Jersey’s cease-and-desist order forced Kalshi into what was described as a “Hobson’s choice”: Either cease operations in New Jersey or risk significant civil and criminal penalties, including fines up to $100,000 per violation.
Kalshi argued — and the court accepted — that suspending operations would cause lasting damage to customer relationships, business partnerships, and public goodwill. Courts routinely treat reputation harm of this kind as irreparable.
The court further ruled that granting an injunction serves the public interest by preserving the federal regulatory structure Congress intended under the CEA. If Kalshi ultimately loses on the merits, New Jersey would still be free to enforce penalties at that time.
Broader implications for Kalshi and state regulators
Judge Kiel’s ruling is a significant procedural victory for Kalshi and a strong early indicator that its federal preemption theory has traction.
The decision reinforces that once a contract is appropriately listed on a CFTC-supervised DCM, states cannot easily assert gambling laws against it, even when the subject matter resembles traditional betting.
That said, key issues remain unresolved.
The CFTC has not yet completed a full “public interest” review of Kalshi’s sports contracts. The court acknowledged that such review had not been conducted, but held that the CFTC’s inaction thus far supports Kalshi’s position. Other states, including Illinois, will likely monitor the developments in this case. Kalshi’s early momentum could deter state-level enforcement if these preliminary rulings hold.
Next steps
The case now moves into discovery, where both sides will gather evidence. Afterward, they may seek summary judgment to avoid trial or proceed to a full trial if major factual disputes arise.
New Jersey may also seek to appeal the preliminary injunction to the Third Circuit Court of Appeals, although appellate courts generally defer to district judges at this early stage.
Ultimately, Kalshi must win on the merits to secure permanent relief and a declaratory judgment. A final victory would set a precedent clarifying the boundaries of state power over federally regulated event markets.
As things stand, Kalshi has preserved its operations and strengthened its legal position. With two preliminary injunctions secured, its federal preemption argument has thus far left state gaming regulators with no power to halt sports event contracts.
