New Jersey Prediction Markets: Inside the Flaherty Case That Could Reach the Supreme Court

Yes. Verified August 2, 2026, prediction markets are legal and available to New Jersey residents, and they are legal because the platforms beat the state in court. Kalshi, Robinhood, Polymarket and other exchanges registered with the Commodity Futures Trading Commission operate here right now. There is no state ban in force, no active court order shutting them down, and no live enforcement action against them. That is the direct answer.

The reason behind it is more important than the answer itself. Availability in New Jersey does not rest on legislative approval or on a friendly regulator — it rests on a preliminary injunction that a divided panel of the U.S. Court of Appeals for the Third Circuit affirmed on April 6, 2026 in KalshiEX LLC v. Flaherty, No. 25-1922. Because the Third Circuit is the federal appellate court whose jurisdiction covers New Jersey, that ruling is binding law inside the state. It protects CFTC-registered exchanges from New Jersey gambling enforcement while the case grinds on.

Here is the catch a reader should not miss. The Flaherty ruling is a preliminary injunction, not a final judgment on the merits. The Third Circuit found only that Kalshi has a reasonable likelihood of winning, not that it has won. New Jersey has been cleared by Justice Samuel Alito to petition the U.S. Supreme Court, with a deadline of August 4, 2026 — two days from the date this page was last verified. The underlying case still has to return to the district court for a full merits fight. So the honest framing is this: prediction markets are legal in New Jersey today, but the legal foundation is provisional, contested, and heading toward the highest court in the country.

The New Jersey Division of Gaming Enforcement is one of the most powerful gambling regulators in the United States, and in the spring of 2025 it decided to use that power against a product it viewed as an unlicensed sportsbook. On March 27, 2025, the DGE — acting through interim director Mary Jo Flaherty — issued a cease-and-desist order to Kalshi, and separately pressed Robinhood, which was distributing Kalshi’s contracts to its own users. Flaherty’s name on that order is the reason the case carries the caption it does: KalshiEX LLC v. Flaherty.

The order’s logic was straightforward from a state-law perspective. New Jersey argued that Kalshi’s sports event contracts were unauthorized sports wagers that violated the New Jersey Sports Wagering Act and the gambling provisions of the state constitution. Flaherty singled out contracts tied to events such as March Madness and highlighted a category New Jersey treats with unusual sensitivity — wagering by New Jersey residents on college games played inside the state. New Jersey law has long walled off in-state collegiate betting, and the DGE saw Kalshi’s menu blowing straight through that wall.

From the state’s vantage point this was not an attack on sports betting. New Jersey loves legal sports betting — it fought the federal government for the right to have it. The DGE’s objection was that Kalshi was offering functionally identical products while sidestepping every rule that a licensed New Jersey sportsbook has to follow: no state license, no state tax, no state-run self-exclusion registry, a minimum age of 18 rather than 21. The regulator that built the model market was watching an outsider run around the model.

Kalshi Refuses, Sues, and Wins the First Round

Kalshi did not fold. Rather than pull its contracts, the company sued in the U.S. District Court for the District of New Jersey, docketed as No. 1:25-cv-02152, and asked for an injunction to stop the DGE from enforcing its order. On April 28, 2025, Judge Edward S. Kiel granted that preliminary injunction. Kiel wrote that he was persuaded Kalshi’s sports-related event contracts fall within the CFTC’s exclusive jurisdiction — a finding that, if it holds, takes the whole subject out of New Jersey’s hands. New Jersey appealed to the Third Circuit, and the fight moved up a level.

What the Third Circuit produced on April 6, 2026 is the first ruling by any federal appeals court in the nation on whether state gambling law can reach sports event contracts. That alone makes it a landmark. A three-judge panel affirmed Judge Kiel’s injunction by a vote of 2 to 1. Judge David J. Porter wrote the majority opinion. Chief Judge Michael A. Chagares joined him. Judge Jane Richards Roth dissented — and her dissent, as much as the majority, is what makes this case a national event.

What the Majority Decided

Porter’s opinion rests on a chain of reasoning that starts with a definition and ends with the state’s authority being stripped away. Step one: Kalshi’s sports event contracts qualify as “swaps” under the Commodity Exchange Act. Step two: the CEA hands the CFTC exclusive jurisdiction over swaps traded on a registered designated contract market, or DCM. Step three: that exclusive federal jurisdiction preempts New Jersey’s gambling laws and constitutional provisions as applied to those contracts. Each link in the chain is contestable, which is exactly why the case is not over, but the panel found all three.

Notably, the majority found two flavors of preemption, and it went further than Judge Kiel had. Field preemption came first — the idea that Congress, by giving the CFTC exclusive authority over DCM trading, occupied the entire field and left no room for state regulation of that trading. The panel was careful to frame the field as regulation of derivatives markets rather than regulation of gambling in general, which let it sidestep the objection that states have always policed gambling. Then the panel added conflict preemption, reasoning that New Jersey’s enforcement collided directly with a market Congress had authorized the CFTC to oversee. The district court had not reached conflict preemption; the appeals court did.

A supporting move in the majority opinion deserves attention because it will resurface at the Supreme Court. Kalshi self-certified its sports contracts with the CFTC under the agency’s rules. Under the statutory scheme, a self-certified contract is presumptively permitted unless the CFTC finds it contrary to the public interest or brings an enforcement action against it. The CFTC had done neither. So the majority treated the contracts as presumptively lawful federal products — and a state, in its view, cannot criminalize a federal product that the responsible federal agency has allowed to stand. The CFTC’s self-certification and review authority live in Rule 40.11.

Two qualifiers keep getting lost in the coverage, and both matter. First, this is a likelihood-of-success finding, not a merits verdict. The panel said Kalshi is likely to win, and that is enough to keep the injunction in place, but the district court still has to decide the case for real. Second, the legal ground under the ruling could shift. The CFTC is in the middle of its own rulemaking about which event contracts are permissible, and the Supreme Court could take a very different view of what counts as a “swap.” A strong win, yes. A permanent one, not yet.

Judge Roth’s Dissent, in Her Own Terms

Read the dissent if you want to understand how New Jersey plans to win at the Supreme Court, because Roth wrote the state’s brief for it. Her central complaint is that the majority ignored a thumb on the scale that should have been decisive. Gambling regulation is one of the oldest and most traditional exercises of state police power, and when Congress legislates near an area states have historically controlled, courts are supposed to start from a presumption against preemption. Roth argued the majority brushed that presumption aside instead of confronting it.

Her second line of attack was about substance over labels. Kalshi’s products, she wrote, are for practical purposes indistinguishable from what a licensed online sportsbook offers — a customer picks a side of a game and gets paid if that side wins. And on marketing, Roth had receipts: she pointed to Kalshi’s own promotional language, which has repeatedly described its offerings in the vocabulary of sports betting.

Her sharpest point was regulatory, and it turns the majority’s self-certification argument on its head. Roth invoked CFTC Rule 40.11(a)(1), which on its face bars DCMs from listing event contracts that involve gaming. If that rule means what it says, she reasoned, then Kalshi’s sports contracts are not presumptively lawful at all — they are presumptively prohibited, and the CFTC’s failure to act is a failure to enforce its own rule rather than a blessing. That argument — state police power, functional equivalence, and Rule 40.11 — is the spine of the petition New Jersey is preparing.

Losing at the Third Circuit put New Jersey, not Kalshi, in the driver’s seat for the next move, because the losing party is the one that seeks review. The state has made clear it intends to petition the U.S. Supreme Court for a writ of certiorari. It asked for and received extra time to do so: Justice Samuel Alito, who handles emergency matters from the Third Circuit, granted an extension setting New Jersey’s filing deadline at August 4, 2026 (application No. 25A1465). As of August 2, 2026, that petition had been signaled and prepared but the docketing and any grant should be confirmed against the Court’s own records, and no petition had yet been granted.

New Jersey’s own explanation for wanting more time is revealing. In its extension request, the state’s solicitor general said the delay was necessary because imminent rulings from other courts — specifically the Fourth Circuit, the Ninth Circuit, and the Massachusetts Supreme Judicial Court — could clarify whether a genuine split has emerged among appellate courts on this exact question. New Jersey is not just trying to lose more slowly. It is trying to time its petition so that it arrives with the strongest possible case for Supreme Court attention: a demonstrated conflict among the circuits.

Why the Justices Might Wait, and What Could Force Their Hand

The Supreme Court takes very few cases, and it usually needs a reason beyond one party’s unhappiness. The classic reason is a circuit split — two federal appeals courts reaching opposite conclusions on the same federal question. Right now the Third Circuit stands largely alone at the appellate level in favor of the platforms, and several legal observers have noted that without a conflicting appellate ruling, the Court has room to deny New Jersey’s petition and let the issue percolate. A denial would leave the Flaherty injunction standing and keep prediction markets legal in New Jersey by default.

That is where the Ninth Circuit becomes the wild card. A consolidated appeal out of Nevada — pulling together cases involving Kalshi, Robinhood Derivatives LLC and the Crypto.com entity — was argued on April 16, 2026, and as of August 2, 2026 the panel has not ruled. The district court in that Nevada matter came out the opposite way from the Third Circuit, holding that these contracts are not swaps. If the Ninth Circuit affirms that view, there is a clean, direct circuit split, and Supreme Court review of the whole question becomes close to inevitable. Either path leads to the same place, and either way the outcome would redraw the national map.

Strip away the legal drama and the mechanics are simpler than they sound. A prediction market is a place to buy and sell contracts that pay out based on whether a specific future event happens. Each contract is a yes-or-no proposition — will the Eagles beat the Cowboys, will inflation come in above a threshold, will a given candidate win — and it settles at one dollar if the answer turns out yes and zero if it turns out no. The price a contract trades at before settlement, somewhere between one cent and 99 cents, doubles as the market’s live estimate of the probability. A contract priced at 62 cents is the crowd saying roughly 62 percent.

The real structural gap from a New Jersey sportsbook is who sits on the other side of your trade. When you place a bet at a licensed New Jersey sportsbook, the house is your counterparty and it builds a margin into the odds. On a prediction-market exchange you are trading against other users through an order book, the same way a stock exchange matches buyers and sellers. You can take an existing price or post your own and wait for someone to hit it. You can also sell a position before the event resolves to lock in a gain or cut a loss, which a traditional straight bet does not let you do. The exchange makes its money on fees rather than on beating you.

For a New Jersey trader the practical experience is app-based and fast. You fund an account, browse markets, buy yes or no on a contract, and either hold to settlement or trade out early. Because these are federally framed financial products rather than state-licensed bets, the account you open is with a CFTC-registered entity, and the rules that govern it are federal commodities rules — not the New Jersey Sports Wagering Act. That distinction is the entire ballgame in the Flaherty case.

Pricing is worth dwelling on because it is where prediction markets diverge most from a New Jersey sportsbook. A moneyline at a licensed book already bakes in the operator’s margin, so a coin-flip game rarely pays even money on both sides. On an exchange, the two sides of a contract must sum to roughly one dollar, and the spread between the best buy and sell prices is set by traders competing with one another rather than by a house protecting its edge. In a liquid market that spread can be a penny or two, which for a sharp bettor can mean better effective odds than a sportsbook offers. In a thin market it can be wide and unforgiving. The upside and the risk both trace back to the same fact: you are trading against people, not against the building.

The market list here reaches well beyond sports, even though sports is what drives the volume and what drove the lawsuit. New Jersey users can generally find contracts across several broad categories, and the mix varies by platform and shifts week to week.

One New Jersey-specific wrinkle is worth flagging even though it is not currently enforced against the platforms: the state’s long-standing hostility to in-state college wagering. New Jersey law bars its licensed sportsbooks from taking bets on New Jersey college teams or on any college event held in the state, and the DGE explicitly cited that concern when it went after Kalshi. The Flaherty injunction means the platforms are not being forced to honor that carve-out right now, but if New Jersey ever regains authority here, in-state collegiate contracts would be the first target.

Beyond the central trio, the rest of the field is built on the same CFTC framework and lists event contracts New Jersey residents can reach. Each is covered in full in its own review. For the view across every operator and state, our prediction markets hub ties it together.

A note on FanDuel Predicts: it lists sports event contracts only in states without a legal FanDuel sportsbook, and New Jersey has one, so it generally will not offer sports markets to Garden State users even though the brand appears above — check the app for its non-sports menu.

New Jersey is not a state where prediction markets are the only game in town — far from it. This is arguably the most mature legal online gambling market in the United States, and that context changes how a resident should think about the choice. Since 2018 New Jersey has run a licensed mobile sports-betting industry, and since 2013 it has offered legal online casino gaming, both supervised by the Division of Gaming Enforcement. A prediction market and a New Jersey sportsbook can look similar on a phone screen, but the machinery behind them could hardly be more different.

The distinctions that matter to a resident are concrete. A licensed New Jersey sportsbook is your counterparty and sets the odds; a prediction exchange matches you against other traders and charges a fee. A sportsbook operates under a New Jersey license, pays New Jersey taxes, and answers to the DGE for complaints and disputes; a CFTC exchange answers to a federal commodities regulator and is not part of New Jersey’s oversight system at all. A sportsbook must verify you are 21; a prediction exchange commonly admits users at 18. And a sportsbook plugs you into New Jersey’s statewide self-exclusion program; an exchange, in most cases, does not. For many New Jersey residents the licensed, state-supervised option will simply be the safer and more familiar path.

To go deeper on the regulated alternative, see our guide to New Jersey online sportsbooks, the roundup of states with online sportsbooks, and our main online sportsbooks hub. You can also survey everything legal in the state through our New Jersey gambling sites overview, browse the full state index, or read our national take on whether online gambling is legal.

Money and safety are where the theoretical becomes personal. Start with taxes, and start with a caveat: this is general information, not tax advice. Kalshi does not cut 1099-B forms for event-contract trades, and the IRS has not published formal guidance classifying prediction-market gains. That leaves the treatment unsettled — gambling income, capital gains, and Section 1256 commodities treatment have all been floated, and the answer may differ depending on whether your product came from an exchange directly or through a brokerage distributor. A New Jersey resident with meaningful activity should keep detailed records and talk to a tax professional rather than assume any single treatment applies. New Jersey also taxes its residents’ income, so state as well as federal reporting is in play regardless of how the federal question resolves.

The missing regulatory net is the part New Jersey’s regulator cared about most, and it is real. When you trade on a CFTC-registered exchange, you step outside New Jersey’s gambling-protection system entirely. There is generally no access to the state’s self-exclusion registry, no DGE complaint desk to escalate a dispute to, and minimum ages that often sit at 18 rather than the 21 New Jersey requires for mobile sports betting. Those are not abstract omissions — they are the exact safeguards New Jersey spent years building around its licensed operators. The sector’s notable exception is FanDuel Predicts, which voluntarily ships deposit limits, self-exclusion tools, and access to behavioral-health services through a partner network. But as noted, FanDuel Predicts typically does not offer sports contracts in a state like New Jersey that already has a legal FanDuel sportsbook, so the most consumer-protective product in the space is the one New Jersey residents are least likely to reach for sports.

The reason to care about a single New Jersey injunction from outside New Jersey is that the Third Circuit’s reasoning is the most developed appellate blueprint the platforms have. Judges in other states are reading Porter’s opinion. Litigants in Nevada, New York, Massachusetts, Ohio and beyond are citing it or distinguishing it. Where other courts have gone the other way — and several have let states enforce, or have found these contracts are not swaps — the disagreement is measured against Flaherty. It is the benchmark ruling.

Consider what the Third Circuit’s approach means for a state’s police power in practice. New Jersey has criminalized unauthorized sports wagering for decades, backed by its constitution and enforced by a dedicated agency with subpoena power and the ability to revoke licenses. Flaherty says none of that reaches a self-certified contract listed on a federal exchange, because the moment a product qualifies as a swap on a DCM, the state’s entire enforcement apparatus is switched off as to that product. That is an enormous transfer of authority accomplished not by Congress writing “sports betting is now federal” but by a definitional argument about what counts as a swap. Whether that transfer is what Congress intended is the question the Supreme Court would ultimately have to answer, and New Jersey is the record on which it would answer it.

New Jersey also matters because of what it represents. This is not a state hostile to gambling looking for an excuse to ban a competitor. It is a sophisticated, pro-betting regulator that built a national model market and objected to prediction markets on a narrow, specific ground: that they duck the licensing, taxation and consumer-protection rules its own sportsbooks must live under. That is a harder argument to dismiss than a blanket moral objection, which is precisely why Roth’s dissent gives it a durable form. When the Supreme Court eventually engages, the New Jersey framing — functional equivalence plus Rule 40.11 plus the presumption against preempting state police power — is the version of the states’ case most likely to land. New Jersey started the fight, lost the first big round, and handed the entire country its sharpest counterargument in the same case.

Several dominoes could fall in the coming months, and any of them could alter the status quo in New Jersey.

• KalshiEX LLC v. Flaherty, No. 25-1922 (3d Cir. April 6, 2026), majority opinion (Porter) and dissent (Roth): www2.ca3.uscourts.gov/opinarch/251922p.pdf
• Third Circuit docket via CourtListener, KalshiEX LLC v. Mary Jo Flaherty: courtlistener.com/docket/70317348/kalshiex-llc-v-mary-jo-flaherty/
• Justia case record, KalshiEX LLC v. Flaherty, No. 25-1922: law.justia.com/cases/federal/appellate-courts/ca3/25-1922/
• NJ Division of Gaming Enforcement emergency cease-and-desist order re Kalshi (March 27, 2025): nj.gov/oag/ge/docs/EmergencyOrders/Kalshi2025.pdf
• D.N.J. No. 1:25-cv-02152 district docket materials: govinfo.gov (USCOURTS-njd-1_25-cv-02152)
• U.S. Supreme Court, application No. 25A1465 for extension of time (Alito, deadline Aug. 4, 2026): supremecourt.gov
• CFTC Rule 40.11 and event-contract review authority: cftc.gov
• Holland and Knight, “Federal Appeals Court: CFTC Jurisdiction Over Sports Event Contracts Likely Exclusive” (April 2026).
• Legal Sports Report, “NJ Extension Request Could Send Kalshi Case To Supreme Court” (July 2026).
• Casino.org, “New Jersey Preps Supreme Court Petition in Kalshi Sports Betting Fight” (2026).
• Murphy v. NCAA, 584 U.S. 453 (2018), the earlier New Jersey sports-betting victory: supremecourt.gov.