Kalshiex LLC v. Mary Jo Flaherty

U.S. COURT OF APPEALS

FOR THE THIRD CIRCUIT

No. 25-1922

KALSHIEX, LLC

v.

MARY JO FLAHERTY; DIVISION OF GAMING ENFORCEMENT;

JAMES T. PLOUSIS; ALISA COOPER; CASINO CONTROL

COMMISSION; MATTHEW J. PLATKIN; JOYCE MOLLINEAUX

MARY JO FLAHERTY; MATTHEW J. PLATKIN,

Appellants

_____________________________

Appeal from the U.S. District Court, D.N.J.

Judge Edward S. Kiel, No. 1:25-cv-02152

Before: CHAGARES, Chief Judge, PORTER, and

ROTH, Circuit Judges

Argued Sep. 10, 2025; Decided Apr. 6, 2026

_____________________________

OPINION OF THE COURT

PORTER, Circuit Judge.

KalshiEX LLC (“Kalshi”) moved preliminarily to

enjoin the New Jersey Division of Gaming Enforcement from

enforcing state law against Kalshi’s sports-related event con-

tracts. The District Court granted Kalshi’s motion. Because

Kalshi has demonstrated a reasonable chance of success on its

argument that the Commodity Exchange Act (“the Act”)

preempts otherwise applicable state law, we will affirm.

I

Kalshi is a financial services company that operates a

designated contract market (“DCM”) licensed by the

Commodity Futures Trading Commission (“CFTC”), on which

it offers event contracts, a type of derivative. Derivatives are

financial tools that mitigate risk and derive their value from

some underlying asset. Kalshi’s event contracts “identify an

event with multiple possible outcomes, a payment schedule for

those outcomes, and an expiration date. The contract’s value is

determined by market forces, which means its price fluctuates

from the time of its creation to its expiration based on percep-

tions about the event’s likelihood.” Appellee’s Brief at 9.

Kalshi customers can buy and trade on predictions about all

sorts of events: political elections, movie box office numbers,

and even the weather. For example, an event contract could ask

whether an earthquake will take place in a certain city on a cer-

tain date. A purchaser may then trade on either “yes” or “no.”

If the earthquake does occur in the city on the date, the “yes”

positions would be paid out.

In December 2024, one of Kalshi’s competitors started

offering event contracts on the outcome of sports events. A

month later, Kalshi began offering the same type of event con-

tract. Two months later, New Jersey sent Kalshi a cease-and-

desist letter stating that Kalshi’s listing of sports-related event

contracts violates New Jersey’s constitution and gambling laws

that prohibit betting on collegiate sports. It threatened to seek

“any measures available under New Jersey law” if Kalshi did

not promptly end its sports betting activities in New Jersey and

void any existing wagers. Joint Appendix (“J.A.”) at 38.

2

Violations of the applicable law are punishable as “crime[s] of

the fourth degree” subject to fines up to $100,000. N.J. Stat.

Ann. §§ 5:12A-11(c), 2C:43-2.

Kalshi immediately commenced this action in the

United States District Court for the District of New Jersey,

seeking preliminarily to enjoin New Jersey from enforcing its

law. The District Court granted the injunction, finding that

Kalshi had a reasonable likelihood of success, faced irreparable

harm, and that the public interest is not served by enforcing an

unconstitutional law. New Jersey appealed.

II

The District Court had jurisdiction under 28 U.S.C.

§ 1331. We have jurisdiction under 28 U.S.C. § 1292(a)(1).

We review the District Court’s “findings of fact for

clear error, its conclusions of law de novo, and the ultimate

decision granting the preliminary injunction for an abuse of

discretion.” Mallet and Co. Inc. v. Lacayo, 16 F.4th 364, 379

n.17 (3d Cir. 2021) (quoting Bimbo Bakeries USA, Inc. v.

Botticella, 613 F.3d 102, 109 (3d Cir. 2010)). Preliminary

injunctions are governed by a well-established four-part test.

The first two are the most important threshold factors:

“likelihood of success on the merits” and whether the party

seeking the injunction “is more likely than not to suffer

irreparable harm in the absence of preliminary relief.” Id. at

380 (quoting Reilly v. City of Harrisburg, 858 F.3d 173, 179

(3d Cir. 2017)). If those two factors are met, the court balances

them along with two others: the balance of equities and the

public interest. Del. State Sportsmen’s Ass’n v. Del. Dep’t of

Safety & Homeland Sec., 108 F.4th 194, 202 (3d Cir. 2024).

Factors three and four “merge when the Government is the

3

opposing party.” Id. at 205 (quoting Nken v. Holder, 556 U.S.

418, 435 (2009)).

III

Kalshi has met its burden for preliminary injunctive

relief. The parties contest whether the CFTC’s exclusive juris-

diction over DCMs as conferred by the Act preempts New

Jersey gambling laws and the state constitution’s prohibition

on collegiate sports betting. New Jersey frames the issue

broadly (regulating all sports gambling) rather than narrowly

(regulating trading on federally designated contract markets).

The text of the Act suggests that the narrow framing is the bet-

ter reading. The Act preempts state laws that directly interfere

with swaps traded on DCMs. Kalshi’s sports-related event con-

tracts are swaps traded on a CFTC-licensed DCM, so the CFTC

has exclusive jurisdiction. The District Court did not abuse its

discretion by finding that Kalshi would more likely than not

suffer irreparable harm absent the preliminary injunction and

that the remaining preliminary injunction factors also weigh in

favor of Kalshi.

A

The parties’ arguments focus on the first factor: likeli-

hood of success on the merits. For that factor, the moving party

must show that “there is a reasonable chance, or probability, of

winning.” Mallet, 16 F.4th at 380 (citation modified). “Reason-

able” does not mean “more likely than not,” but it does mean

“significantly better than negligible.” Id. The District Court

concluded that Kalshi demonstrated a likelihood of success on

its argument that the Act preempts New Jersey law from reach-

ing into CFTC-licensed DCMs. We agree.

4

1

The Act, first passed in 1936, regulates derivatives mar-

kets. At first, the law did not preempt state regulation in the

area. But that resulted in a patchwork of state regulations, so

Congress amended the Act in 1974 and created the CFTC to

oversee trading on federally designated “contract market[s].” 7

U.S.C. § 2(a)(1)(A). The CFTC has an array of powers to

investigate and prohibit contracts. Initially, there is a long and

involved process before the CFTC will officially “designate” a

prospective contract market. See generally 7 U.S.C. § 7. Once

designated, a DCM does not need pre-approval before listing

contracts, although it must self-certify compliance with the

applicable laws and regulations. 7 U.S.C. § 7a-2(c)(1).

The 1974 amendments also expanded the Act’s reach

from just agricultural products to all “goods and articles . . .

and all services, rights, and interests . . . in which contracts for

future delivery are presently or in the future dealt in.” 7 U.S.C.

§ 1a(9). And in 2000, Congress expanded the Act to qualifying

events, defined as an “occurrence” or “contingency” that is

“beyond the control of the parties to the . . . transaction; and

associated with a financial, commercial, or economic conse-

quence.” 7 U.S.C. §§ 1a(19)(iv), (iv)(I)–(II).

The Dodd-Frank Act of 2010 amended the Act again,

this time adding a new class of futures known as “swaps” and

expanding the CFTC’s exclusive jurisdiction “with respect to

accounts, agreements . . . and transactions involving swaps or

contracts of sale of a commodity for future delivery . . . traded

or executed on a [DCM.]” 7 U.S.C. § 2(a)(1)(A). The Act

defines “swap” to include “any agreement, contract, or trans-

action . . . that provides for any . . . payment[ ] or delivery . . .

that is dependent on the occurrence, nonoccurrence, or the

5

extent of the occurrence of an event or contingency associated

with a potential financial, economic, or commercial conse-

quence.” 7 U.S.C. §§ 1a(47)(A), (A)(ii). In other words,

“swap” includes event contracts.1

The Dodd-Frank Act also implemented a “[s]pecial

rule” for event contracts, giving the CFTC discretionary power

to review and prohibit six categories of contracts if it concludes

they are “contrary to the public interest.” 7 U.S.C. §§ 7a-

2(c)(5)(C), (C)(i). Relevant here, those categories include con-

tracts that involve “gaming” or “other similar activity deter-

mined by the [CFTC], by rule or regulation, to be contrary to

the public interest.” 7 U.S.C. §§ 7a-2(c)(5)(C)(i)(V)–(VI). The

CFTC has codified this power in a regulation, 17 C.F.R.

§ 40.11, but it has not yet acted to review or prohibit any

sports-related event contracts. Cf. Prediction Markets, 91 Fed.

Reg. 12516, 12521 (proposed March 16, 2026) (inviting com-

ment on the scope and public interest implications of “gam-

ing,” and “sports competition”).

Although the Act grants the CFTC exclusive regulatory

jurisdiction over event contracts, there are two savings clause

carveouts that permit state regulation in certain areas not cov-

ered by the Act. The first says: “Except as hereinabove pro-

vided, nothing contained in this section shall . . . supersede or

limit the jurisdiction at any time conferred on . . . other regula-

tory authorities under the laws of the United States or of any

State.” 7 U.S.C. § 2(a)(1)(A) (emphasis added). And the sec-

1

The CFTC recently published an advance notice of proposed

rulemaking regarding “event contract derivatives traded on

markets commonly referred to as ‘prediction markets,’ ” which

include sporting events contracts. Prediction Markets, 91 Fed.

Reg. 12516, 12516–17 & n.9 (proposed March 16, 2026).

6

ond follows: “Nothing in this section shall supersede or limit

the jurisdiction conferred on courts of the United States or any

State.” Id.

2

a

In 2020, the CFTC certified Kalshi’s online exchange

as a DCM after a nine-month review period. See KalshiEX LLC

v. CFTC, No. 23-cv-3257, 2024 WL 4164694, at *4 (D.D.C.

Sept. 12, 2024) (“In 2020, the CFTC authorized Kalshi . . . to

list event contracts for public trading as a DCM.”). About five

years later, Kalshi began offering sports-related event contracts

on its DCM exchange. Kalshi self-certified compliance with

the applicable laws and regulations, so those event contracts

were presumptively approved under federal law. See 7 U.S.C.

§ 7a-2(c)(1). To date, the CFTC has not determined that

Kalshi’s sports-related event contracts are contrary to the pub-

lic interest. See 7 U.S.C. § 7a-2(c)(5)(C)(ii); 17 C.F.R. § 40.11.

And though the dissent labels Kalshi’s event contracts

“gaming contracts” and argues that they fall under the “special

rule,” Dissent at 17–18, the CFTC has chosen not to enforce its

regulation against the type of sports-related event contracts at

issue here. In fact, it has already certified many “sporting

events” contracts for listing. 91 Fed. Reg. at 12517 n.9 (citing

Designated Contract Market Products, CFTC,

https://perma.cc/93Y2-K6ZT (last visited Mar. 17, 2026)).

New Jersey argues that Kalshi’s event contracts are not

“swaps” covered by the Act “because the outcome of a sports

game is not ‘joined or connected’ with a financial, economic,

or commercial instrument or measure.” Appellant’s Brief at

7

23–24. But its proposed “joined or connected” requirement

raises the bar beyond what the Act requires.

As always with statutory interpretation, “we begin with

the text.” United States v. Johnson, 114 F.4th 148, 153 (3d Cir.

2024). The Act provides that the relevant event or occurrence

need only be “associated with a potential financial, economic,

or commercial consequence.” 7 U.S.C. § 1a(47)(A), (A)(ii). As

the dissent concedes, “[a] plain reading of the Act’s text sug-

gests that Kalshi’s sports-event contracts fit comfortably

within the statutory definition.” Dissent at 2. That is correct.

The outcome of a sports event certainly can be associated with

a potential financial, economic, or commercial consequence.

The District Court did not clearly err when it identified numer-

ous affected stakeholders, including sponsors, advertisers, tel-

evision networks, franchises, and local and national communi-

ties. The analysis need not go further. Because Kalshi’s sports-

related event contracts are traded on a CFTC-licensed DCM

and depend on event outcomes associated with economic con-

sequences, they fit within the Act’s definition of “swaps”

subject to the CFTC’s jurisdiction. See 7 U.S.C.

§§ 2(a)(1)(A), 1a(47)(A)(ii).

New Jersey and the dissent “pile inference upon infer-

ence” and postulate that anything from bingo games to ping-

pong matches will fall under the CFTC’s jurisdiction. See

United States v. Lopez, 514 U.S. 549, 567 (1995); see also

Transcript of Oral Argument at 18 (lines 12–22), KalshiEX,

LLC v. Flaherty, et al., No. 25-1922 (Sept. 24, 2025). But

Kalshi makes no such claim, and the District Court does not so

broadly hold. In such far-fetched scenarios, Congress’s express

delegation to the CTFC and the Securities and Exchange

Commission to “further define” swaps would prove useful. 15

U.S.C. § 8302(d)(1); see, e.g., Further Definition of “Swap,”

8

77 Fed. Reg. 48208, 48246 (Aug. 13, 2012) (excluding certain

“consumer transactions” from the statutory definition).

b

New Jersey contends that the contracts can be regulated

by the states and are not preempted by the Act. Under the

Supremacy Clause, “federal law is supreme in case of a conflict

with state law.” Murphy v. Natl. Collegiate Athletic Ass’n, 584

U.S. 453, 477 (2018); U.S. Const. art. VI, cl. 2. It can preempt

state law either expressly or impliedly. Klotz v. Celentano

Stadtmauer & Walentowicz LLP, 991 F.3d 458, 463 (3d Cir.

2021). Implied preemption falls into two categories, field or

conflict preemption, although the Supreme Court has recog-

nized that “the categories of preemption are not rigidly dis-

tinct” and that “field preemption may be understood as a spe-

cies of conflict preemption.” Crosby v. Nat’l Foreign Trade

Council, 530 U.S. 363, 372 n.6 (2000) (citation modified). We

hold that both field and conflict preemption apply.

i

The District Court considered whether the Act

impliedly preempted state regulation of DCMs and concluded

that “at the very least field preemption applies.” J.A. 11–14.

We agree. Kalshi has demonstrated a reasonable chance of suc-

cess in showing that the text of the Act preempts otherwise

9

applicable state laws that purport to regulate sports-related

event contracts on CFTC-licensed DCMs.2

As we have recognized, “all preemption arguments[ ]

must be grounded in the text and structure of the [federal] stat-

ute at issue.” Klotz, 991 F.3d at 463 (quoting Kansas v. Garcia,

589 U.S. 191, 208 (2020)). Field preemption sounds a lot like

express preemption—“it concerns a clash between a constitu-

tional exercise of Congress’s legislative power and conflicting

state law.” Murphy, 584 U.S. at 479. That conflicting state law

is field preempted when “federal law occupies a ‘field’ of reg-

ulation ‘so comprehensively that it has left no room for supple-

mentary state legislation.’ ” Id. (quoting R.J. Reynolds Tobacco

Co. v. Durham Cnty, 479 U.S. 130, 140 (1986); see also

Sikkelee v. Precision Airmotive Corp., 822 F.3d 680, 688 (3d

Cir. 2016).

Here, the Act grants the CFTC exclusive jurisdiction

over “swaps . . . traded or executed on a [DCM],” which

include Kalshi’s sports-related event contracts. 7 U.S.C.

§ 2(a)(1)(A); see supra § III.A.2.a. The Act does have a limit-

ing principle: it “shall [not] supersede or preempt . . . the

application of any Federal or State statute . . . to any transac-

tion . . . that is not conducted on or subject to the rules of a

registered entity.” 7 U.S.C. § 16(e)(1)(B)(i) (emphasis added).

But here, registered entities include DCMs, so that limiting

principle does not apply. 7 U.S.C. § 1a(40)(A).

2

We need not address the parties’ extra-textual arguments

related to whether the Act preempts all state gambling

regulation, because Kalshi does not argue that the Act

preempts all state gambling regulation.

10

The dissent contends that DCM trading is a subfield of

futures trading, and that the Act is not “sufficiently compre-

hensive . . . to preclude enforcement of state laws on the same

subject.” Dissent at 9. But as our sister circuits have held, the

Act preempts state law purporting to regulate futures trading.

See, e.g., F.T.C. v. Ken Roberts Co., 276 F.3d 583, 591–92

(D.C. Cir. 2001); Am. Agric. Movement, Inc. v. Bd. of Trade of

Chi., 977 F.2d 1147, 1157 (7th Cir. 1992); Leist v. Simplot, 638

F.2d 283, 322 (2d Cir. 1980). This is consistent with Con-

gress’s longtime regulation of futures trading dating back to

the early twentieth century. See Bd. of Trade of Chi. v. Olsen,

262 U.S. 1, 43 (1923). Because Kalshi’s sports-related event

contracts are swaps under the Act, the District Court properly

defined the scope of field preemption as the regulation of trad-

ing on a DCM (a form of futures trading) rather than as gam-

bling (a broader and traditionally state-regulated field).3 See

Schaffner v. Monsanto Corp., 113 F.4th 364, 392 (3d Cir.

2024) (“[O]ur understanding of the scope of a pre-emption stat-

ute . . . must rest primarily on a fair understanding of congres-

sional purpose . . . [drawn] primarily from the text of the stat-

ute and from its surrounding framework.”) (citation modified);

Sikkelee, 822 F.3d at 689 (cautioning that, when assessing

preemption, courts should avoid “interpreting the scope of the

preempted field too broadly”). Thus, the District Court did not

3

While there are two savings clauses in the Act, those do not

mean that “Congress decided to allow room for state law” on

futures trading. Dissent at 13. Unlike other statutes that allow

for states to impose stricter standards or other coterminous reg-

ulation, the Act has no such allowance and preserves

jurisdiction only for state common-law actions. See infra

§ III.A.2.c.

11

err in holding that New Jersey law is field preempted by the

Act.

ii

Though the District Court limited its analysis to field

preemption, conflict preemption also prohibits New Jersey

from regulating sports-related event contracts on CFTC-

licensed DCMs. See TD Bank N.A. v. Hill, 928 F.3d 259, 276

(3d Cir. 2019) (“[W]e may affirm on any ground supported by

the record . . . .”).

Conflict preemption “occurs when a state law conflicts

with federal law such that compliance with both state and fed-

eral regulations is impossible, or when a challenged state law

stands as an obstacle to the accomplishment and execution of

the full purposes and objectives of a federal law.” Sikkelee, 822

F.3d at 688 (citation modified); see also Silkwood v. Kerr-

McGee Corp., 464 U.S. 238, 248 (1984).

To determine whether New Jersey’s laws and constitu-

tion stand as an obstacle to the Act, we first determine

Congress’s “full purposes and objectives” of the Act as evi-

denced by “the text and structure of the [federal] statute at

issue.” Klotz, 991 F.3d at 463 (citation omitted). Here, there’s

little doubt that the Act is “a comprehensive regulatory struc-

ture to oversee the volatile and esoteric futures trading com-

plex.” Merrill Lynch, Pierce, Fenner & Smith, Inc. v. Curran,

456 U.S. 353, 356 (1982) (citation omitted). As detailed above,

Congress created the CFTC and amended the Act to do away

with the patchwork of state regulations and bring futures trad-

ing on DCMs under the exclusive jurisdiction of the CFTC.

Supra § III.A.1.

12

Second, we ask whether the state law “stands as an

obstacle” to those objectives. Sikkelee, 822 F.3d at 688 (cita-

tion modified). It does. Allowing New Jersey to enforce its

gambling laws and state constitution would create an obstacle

to executing the Act because such state enforcement would

prohibit Kalshi, which operates a licensed DCM under the

exclusive jurisdiction of the CFTC, from offering its sports-

related event contracts in New Jersey. This state regulation is

exactly the patchwork that Congress replaced wholecloth by

creating the CFTC. Because that prohibition directly conflicts

with the full purposes and objectives of the Act, we need not

determine whether it would be impossible for Kalshi to comply

with both state and federal regulations. See Am. Agric.

Movement, Inc., 977 F.2d at 1156 (holding that state laws

“directly affect[ing] trading on or the operation of a futures

market” are conflict preempted by the Act).

iii

Our dissenting colleague emphasizes the “strong pre-

sumption against preemption in areas of the law that States

have traditionally occupied.” Sikkelee, 822 F.3d at 687. But

neither “[b]asic abductive reasoning” nor construing “silence”

one way or the other can overcome the Act’s text. Dissent at 7,

21. Even accepting the dissent’s premise that states have long

13

regulated gambling,4 the text preempts state gambling laws that

seek to regulate futures trading, i.e., Kalshi’s sports-related

event contracts traded on a DCM under the exclusive jurisdic-

tion of the CFTC. 7 U.S.C. § 16(e)(1)(B)(i). Again, the federal

government has regulated the derivatives market for over a

century. See Olsen, 262 U.S. at 43 (upholding the constitution-

ality of the Grain Futures Act, predecessor to the Act). And it

delegated that regulation to the CFTC, which has expertise in

swaps like event contracts. See 7 U.S.C. §§ 1a(47)(A), (A)(ii);

2(a)(1)(A); 91 Fed. Reg. at 12517 (noting that the CFTC has

regulated event contracts since at least 2008); Michael S. Selig,

Chairman, Commodity Futures Trading Comm’n, Remarks:

The Next Phase of Project Crypto: Unleashing Innovation for

the New Frontier of Finance (Jan. 29, 2026) (“[T]he [CFTC]

has the expertise and responsibility to defend its exclusive

jurisdiction over commodity derivatives”).

c

New Jersey argues that the Act’s savings clause carve-

outs preserve state jurisdiction over sports-related event con-

tracts on CFTC-licensed DCMs. But the clear text of the Act

says otherwise. Both carveouts follow the Act’s grant of CFTC

exclusive jurisdiction over swaps. The first preserves state

4

States have long regulated intrastate gambling, but not

interstate gambling. See Churchill Downs Tech. Initiatives Co.

v. Mich. Gaming Control Bd., 162 F.4th 631, 641 n.5 (6th Cir.

2025) (“[S]ince the regulation of interstate gambling isn’t a

traditional area of state regulation, the presumption against

preemption doesn’t apply.”) (emphasis in original); see also

Wire Act of 1961, 18 U.S.C. § 1084 (federal gambling law pro-

hibiting the interstate wire transmission of bets or wagers on

any sporting event or contest).

14

jurisdiction “except as hereinabove provided.” 7 U.S.C.

§ 2(a)(1)(A) (emphasis added). That prefatory clause indicates

that swaps fall under the CFTC’s exclusive jurisdiction. And

as the District Court recognized, the second carveout preserves

jurisdiction for state courts in common-law actions but does

not contravene the grant of CFTC’s exclusive jurisdiction.5 Id.

Congress gave the CFTC exclusive jurisdiction over

trades on DCMs, provided for continued state regulation of

trades conducted off DCMs, and recognized that while event

contracts could involve gaming, the CFTC has discretionary

power to review and prohibit those contracts. Thus, it was rea-

sonable for the District Court to conclude that Kalshi was

5

We agree with other circuits that carveouts for state actions

like negligence and fraud do not undermine the Act’s

preemptive regulation of commodity futures. See, e.g., Kerr v.

First Commodity Corp. of Boston, 735 F.2d 281, 288 (8th Cir.

1984) (“[T]he continued existence of common law fraud

actions permitting punitive damage awards does not conflict

with the regulatory scheme established by the Act. Congress

recognized this by including [the] savings clause . . . .”); Kotz

v. Bache Halsey Stuart, Inc., 685 F.2d 1204, 1207 (9th Cir.

1982) (“Congress clearly intended to create a single agency to

regulate the field [of futures trading] . . . It does not follow,

however, that creation of a central regulatory authority [the

CFTC] means abolition of common law rights, unless their

retention would render the regulatory scheme ineffective.”);

United States v. Brien, 617 F.2d 299, 310 (1st Cir. 1980)

(“While courts have held that the CFTA preempts state regula-

tion of commodities futures, it has also been held that the

CFTA does not preempt state general antifraud statutes.”)

(citation omitted).

15

likely to succeed in showing that the Act preempts New Jersey

law from reaching into Kalshi’s CFTC-licensed DCM to ban

sports-related event contracts.6

B

The remaining preliminary-injunction factors, on bal-

ance, tip the scale in favor of Kalshi. As for irreparable harm,

the moving party must demonstrate “potential harm which can-

not be redressed by a legal or an equitable remedy following a

trial.” Ramsay v. Nat’l Bd. of Med. Exam’rs, 968 F.3d 251, 262

(3d Cir. 2020) (quotation omitted). New Jersey threatened

Kalshi with civil and criminal penalties. See Morales v. Trans

World Airlines, Inc., 504 U.S. 374, 381 (1992) (“When

enforcement actions are imminent . . . there is no adequate

remedy at law.”). The District Court did not abuse its discretion

when it held that, absent injunctive relief, Kalshi would suffer

6

Other courts considering this question have also determined

that Kalshi’s sports-related event contracts on its DCM are sub-

ject to the exclusive jurisdiction of the CFTC. Kalshiex LLC v.

Orgel, No. 3:26-CV-00034, 2026 WL 474869, at *7 (M.D.

Tenn. Feb. 19, 2026) (“The court finds that Kalshi is likely to

succeed on the merits because sports event contracts are

“swaps” and conflict preemption applies.”); Blue Lake

Rancheria v. Kalshi Inc., No. 3:25-cv-6162, 2025 WL

3141202, at *7 (N.D. Cal. Nov. 10, 2025) (“Plaintiffs have not

shown the Court has jurisdiction to decide whether Kalshi’s

event contracts violate the [Act]. That decision belongs to the

[CFTC], which has ‘exclusive jurisdiction’ over its contract

markets.”); see also KalshiEX LLC v. Flaherty, No. 25-cv-

02152, 2025 WL 1218313, at *6 (D.N.J. Apr. 28, 2025) (“I am

persuaded that Kalshi’s sports-related event contracts fall

within the CFTC’s exclusive jurisdiction . . . .”).

16

economic and reputational harm, including loss of business and

goodwill. See Kos Pharms., Inc. v. Andrx Corp., 369 F.3d 700,

726 (3d Cir. 2004) (“Grounds for irreparable injury include

loss of control of reputation, loss of trade, and loss of good

will.”). The District Court pointed to a concrete example of lost

business: a trading partner refused to list Kalshi event contracts

in New Jersey because of a similar cease-and-desist letter.

The District Court also did not abuse its discretion by

balancing the equities and public interest factors in favor of

Kalshi. If the Act preempts New Jersey law, then the public

interest is best served by enforcing the Act. See N.J. Retail

Merchs. Ass’n v. Sidamon-Eristoff, 669 F.3d 374, 389 (3d Cir.

2012) (“[T]he public interest [is] not served by the enforcement

of an unconstitutional law.”). Because we agree with the Dis-

trict Court that Kalshi has shown likelihood of success on its

argument that the CFTC’s exclusive jurisdiction over DCMs

preempts New Jersey gambling laws and the state constitution,

we conclude that the public interest factors tip toward Kalshi.

* * *

Because the likelihood-of-success and irreparable-harm

factors favor Kalshi, and the last factors largely turn on a

determination of the merits, the District Court did not abuse its

discretion by granting the preliminary injunction. We will

affirm.

17

Matthew J. Platkin

Liza B. Fleming

Stephen Ehrlich [ARGUED]

Emily M. Bisnauth

Vivek N. Mehta

Office of the New Jersey Attorney General

Counsel for Appellants

Andrew L. Schlafly

Counsel for Amicus Appellants Stop Predatory

Gambling, Texans Against Gambling, and Association

of American Physicians and Surgeons

Elizabeth A. Bower

Joseph H. Webster

Hobbs Straus Dean & Walker LLP

Scott D. Crowell

Crowell Law Offices

Michael C. Hoenig

Yuhaaviatam of San Manuel Nation

Counsel for Amicus Appellant Indian Gaming

Association, et al.

Kevin F. King

Eli Nachmany

Covington & Burling LLP

Counsel for Amicus Appellant American Gaming

Association

18

Zachery P. Keller

Office of Attorney General of Ohio

Office of the Solicitor General

Heidi P. Stern

Jessica E. Whelan

Office of Attorney General of Nevada

Counsel for Amicus Appellants 34 States, District of

Columbia, and Northern Mariana Islands

Alexander H. Loomis

Derek Shaffer

Quinn Emanuel Urquhart & Sullivan, LLP

Counsel for Amicus Appellant Casino Association of

New Jersey Inc.

Neal K. Katyal

William E. Havemann [ARGUED]

Samantha K. Ilagan

Gurbir S. Grewal

Milbank LLP

Counsel for Appellee

Tyler R. Green

Consovoy McCarthy PLLC

Counsel for Amicus Appellee Paradigm Operations LP

Michael M. Rosensaft

Katten Muchin Rosenman LLP

Counsel for Amicus Appellee Bitnomial Exchange LLC

19

Megan Barbero

Kyle Keraga

Carlos H. Salguero, Jr.

Venable LLP

Counsel for Amicus Appellees Max Baucus, Blanche L.

Lincoln, Saxby Chambliss, K. Michael Conaway, Collin

Peterson, Cheri Bustos, and Cindy Axne

Scott D. Brenner

Parlatore Law Group, LLP

Counsel for Amicus Curiae New Finance Institute

20

ROTH, Circuit Judge, dissenting.

When I went on the Kalshi page for the Carolina

Panthers vs. Tampa Bay Buccaneers football game scheduled

for January 3, 2026, I could have bet on the winner (game

outcome).1 I could have also bet on whether I believed Tampa

Bay would win by more than 2.5 points (point spread), whether

the two teams would collectively score 45 or more points

(game props), or whether former Tampa Bay wide receiver

Mike Evans would score a touchdown (player props).2 These

offerings are virtually indistinguishable from the betting

products available on online sportsbooks, such as DraftKings

and FanDuel. While online sportsbooks are regulated by states

such as New Jersey, Kalshi asserts that it is outside the bounds

of state regulation because it does not offer gambling products.

Instead, Kalshi contends its offered sports-event contracts are

swaps, subject to the exclusive jurisdiction of the CFTC. The

Majority agrees, holding that Kalshi’s registration as a DCM

and branding of its wagers as sports-event contracts are acts of

alchemy that transmute its products from sports gambling to

futures trading. I see Kalshi’s actions as a performative sleight

meant to obscure the reality that Kalshi’s products are sports

gambling. Because Kalshi is facilitating gambling, it can be

subjected to state regulation.

The Majority’s preemption analysis fails to adequately

consider the presumption against preemption, which applies

1

Carolina at Tampa Bay, KALSHI,

https://kalshi.com/markets/kxnflgame/professional-football-

game/kxnflgame-26jan04cartb [https://perma.cc/ZG4E-

RPAH?type=image] (last visited Jan. 2, 2026).

2

Id.

with special force here because gambling has traditionally been

regulated by the states.3 I believe that when taking into account

the presumption against preemption, the application of New

Jersey’s gambling laws to Kalshi’s sports-event contracts is not

field preempted. I would also hold that conflict preemption

does not apply because Kalshi is not precluded from complying

with both New Jersey and federal law, and because New

Jersey’s regulations do not undermine the congressional

objectives behind the Act. Accordingly, because Kalshi cannot

demonstrate a likelihood of success on the merits and show that

New Jersey’s gambling laws are federally preempted, I

respectfully dissent.

I.

Before I delve into the preemption analysis, I would like

to briefly address the Majority’s holding that Kalshi’s sports-

event contracts fall within the Act’s definition of swaps. Both

parties make compelling arguments in support of their

respective positions. On the one hand, Kalshi is correct that

the statutory definition of swaps is broad, with the Act defining

swaps as “any agreement, contract, or transaction . . . that

provides for any purchase, sale, payment, or delivery . . . that

is dependent on the occurrence, nonoccurrence, or the extent

of the occurrence of an event or contingency associated with a

potential financial, economic, or commercial consequence.”4

A plain reading of the Act’s text suggests that Kalshi’s sports-

event contracts fit comfortably within the statutory definition.

On the other hand, we should not read statutes literally

“if reliance on that language would defeat the plain purpose of

3

See infra Section II.

4

7 U.S.C. § 1a(47)(A).

2

the statute,”5 or would “def[y] rationality.”6 As New Jersey

argues, Kalshi’s proffered definition would likely encompass

virtually every kind of wager that could exist, including classic

casino games and charity raffles. After all, even a bet over the

outcome of a friendly neighborhood ping pong match may

have a “potential financial . . . consequence” because one of

the bettors would reap a financial reward based on the match’s

outcome.7 Moreover, because the trading of swaps outside

DCMs is illegal under 7 U.S.C. § 2(e), any individual who

engages in gambling outside of a DCM would commit a felony

were we to take the definition of swaps to its logical extreme.

Congress could not have intended for such a rationality-

defying outcome.

The Majority contends that my concerns with the

potential consequences of Kalshi’s proffered swaps definition

are based on a pile of “inference upon inference,”8 but I rely on

no inferences whatsoever. I simply apply the definition to the

real world and articulate the ramifications as I see them. In any

event, because I would rule against Kalshi on the basis of

preemption,9 I need not—and will not—decide whether

Kalshi’s sports-event contracts fall within the statutory

definition of swaps. That said, as I have laid out above, the

question of whether sports-event contracts are swaps is a

thorny issue with the potential to radically upend the legal

5

Bob Jones Univ. v. United States, 461 U.S. 574, 586 (1983).

6

Riccio v. Sentry Credit, Inc., 954 F.3d 582, 588 (3d Cir. 2020)

(internal citation and quotation marks omitted).

7

7 U.S.C. § 1a(47)(A) (emphasis added).

8

Maj. Op. 8.

9

See infra Sections III and IV.

3

landscape governing the gambling industry, and I am not

convinced the Majority’s analysis does this issue justice.

II.

Turning to preemption, I believe it is first important to

provide a brief overview of the presumption against

preemption, a bedrock principle of preemption law that the

Majority incorrectly believes to be inapplicable. Courts cannot

find preemption unless Congress’s “clear and manifest

purpose” was for the federal law to supersede “the historic

police powers of the States.”10 Preemption principles counsel

that a close call weighs against a finding of preemption. The

presumption against preemption applies with special force

when Congress has legislated in a field traditionally occupied

by the states.11

Throughout U.S. history, gambling regulation has been

largely left to the state legislatures.12 Courts have noted that

10

Rice v. Santa Fe Elevator Corp., 331 U.S. 218, 230 (1947).

11

Altria Grp., Inc. v. Good, 555 U.S. 70, 77 (2008) (citing

Medtronic, Inc. v. Lohr, 518 U.S 470, 485 (1996)).

12

See Ah Sin v. Wittman, 198 U.S. 500, 505–06 (1905) (“The

suppression of gambling is concededly within the police

powers of a state.”); WV Ass'n of Club Owners & Fraternal

Servs., Inc. v. Musgrave, 553 F.3d 292, 302 (4th Cir. 2009) (“It

is well recognized that regulating gambling is at the core of the

state's residual powers as a sovereign in our constitutional

scheme.”); Flynt v. Bonta, 131 F.4th 918, 932 (9th Cir. 2025)

(“Gambling does not involve an inherently national system of

regulation, given the states’ long-understood authority in this

area.”).

4

gambling is a potentially harmful “vice activity,”13 which

states may regulate under their police powers to promote the

“welfare, safety, and morals” of their citizens.14 While federal

gambling laws exist, they generally supplement state laws by

targeting areas outside state jurisdiction, such as U.S. territorial

waters,15 Native American lands,16 and the channels and

instrumentalities of interstate commerce.17 These federal laws

also contain non-preemption provisions allowing for state

gaming regulations.18 Congress in 1978 summarized the

federal-state balance in gambling laws as follows:

[T]he States should have the primary

responsibility for determining what forms of

gambling may legally take place within their

borders; the Federal Government should prevent

interference by one State with the gambling

policies of another, and should act to protect

identifiable national interests; and in the limited

area of interstate off-track wagering on

horseraces, there is a need for Federal action to

ensure States will continue to cooperate with one

another in the acceptance of legal interstate

13

Greater New Orleans Broad. Ass’n v. United States, 527

U.S. 173, 185 (1999).

14

Artichoke Joe’s Cal. Grand Casino v. Norton, 353 F.3d 712,

737 (9th Cir. 2003).

15

18 U.S.C. §§ 1081–83 (Gambling Ship Act).

16

15 U.S.C. § 1175 (Johnson Act).

17

18 U.S.C. § 1084 (Wire Act).

18

See e.g., 18 U.S.C. §§ 1082(a), 1083(a) (Gambling Ships

Act); 15 U.S.C. § 1172(a) (Johnson Act); 18 U.S.C. § 1084(b)

(Wire Act).

5

wagers.19

Several states allowed certain forms of sports betting

until Congress in 1992 passed the Professional and Amateur

Sports Protection Act (PASPA), which barred states from

authorizing sports betting.20 This federal prohibition on sports

betting continued until 2018, when the Supreme Court in

Murphy v. NCAA held that PASPA’s preemption provision was

unconstitutional and without effect.21 The Court explained that

“Congress can regulate sports gambling directly, but if it elects

not to do so, each State is free to act on its own.”22 Congress

did not, so states did. As of July 2025, nearly 40 states have

legalized sports gaming in some form or another. Many of

these states use gaming taxes to fund public programs, and

have adopted comprehensive regulatory schemes to protect the

public from gambling addiction.

Of course, if Kalshi is correct that its products are not

gambling, then discussion about the states’ preeminent role in

regulating gambling is moot. It is difficult, however, to take

Kalshi’s argument at face value when its marketing materials,

such as the Instagram posts below, routinely refer to its

products as “sports betting:”23

19

15 U.S.C. § 3001(a) (emphasis added).

20

See 28 U.S.C. §§ 3701–04.

21

Murphy v. NCAA, 584 U.S. 453, 479–80 (2018).

22

Id. at 486.

23

Casino Ass’n of New Jersey Br. at 24 (citing Dustin Gouker,

Ten Times Kalshi Said People Could Bet On Things, Event

Horizon (Apr. 3, 2025), https://tinyurl.com/5a6x8kan.

6

Marketing materials such as these, coupled with the fact

that Kalshi’s sports related offerings are a dead ringer for the

products offered by state-regulated online sportsbooks, make it

difficult for me to accept the proposition that Kalshi is not

facilitating gambling. Basic abductive reasoning tells us that

if it looks like gambling, talks like gambling, and calls itself

gambling, it’s gambling.

The Majority believes the presumption against

preemption does not apply because federal law governs

interstate gambling. That fact is inapposite, however, because

New Jersey does not seek to regulate interstate gambling—it

only claims jurisdiction over Kalshi’s sports betting activity

7

occurring within the state. The historical tradition of states

having the dominant interest in intrastate gambling regulations

means that our court must “start with the assumption that the

historic police powers of the States were not to be superseded

by the Federal Act”24 when applying the preemption analysis

to New Jersey’s gambling laws. As the party asserting

preemption, Kalshi bears the burden of overcoming this

presumption.

III.

The Majority holds that New Jersey’s gambling laws as

applied to Kalshi are field preempted because the Act grants

the CFTC exclusive jurisdiction over trading on DCMs. The

Majority believes the CFTC’s occupation of the field of DCM

trading gives it the sole authority to regulate Kalshi because it

is a DCM. There are two issues with the Majority’s holding.

First, the Majority assumes that the relevant field is trading on

DCMs when DCM trading is in fact better thought of as a

subfield of futures trading. Because the federal occupation of

a subfield cannot overcome the presumption against

preemption, the CFTC’s occupation of the subfield of DCM

trading is insufficient to preempt state gambling laws. Second,

the Majority inadequately addresses the fact that the Act

contains savings clauses, which are incompatible with field

preemption.

A.

Although I agree with the Majority that the Act’s text

indicates that federal law occupies the field of DCM trading, I

24

Medtronic, Inc., 518 U.S. at 485 (internal quotation mark

omitted).

8

disagree with the Majority’s holding that DCM trading is the

relevant field for our preemption analysis. In fact, the Majority

does not bother with methodically determining the proper field

for preemption purposes and instead assumes that the pertinent

field is trading on DCMs because “Kalshi’s sports-related

event contracts are swaps under the Act.”25

The Majority is mistaken in doing so because

identifying the appropriate field is fundamental for this

analysis.26 Not all fields are created equal. For field

preemption to apply, the field must be “sufficiently

comprehensive” or “so dominant that the federal system will

be assumed to preclude enforcement of state laws on the same

subject.”27 Subjects where field preemption have been found

to apply include broad areas of law such as foreign affairs,

international relations, and immigration.28 DCM trading is not

the sort of comprehensive field where the federal interest is so

dominant that Congress intended for the “complete ouster of

state power.”29 Rather, DCM trading is a subfield of futures

25

Maj. Op. 11.

26

Kansas v. Garcia, 589 U.S. 191, 208 (2020) (“In order to

determine whether Congress has implicitly ousted the States

from regulating in a particular field, we must first identify the

field in which this is said to have occurred.”).

27

Farina v. Nokia Inc., 625 F.3d 97, 121 (3d Cir. 2010)

(citations omitted).

28

A. Scalia & B. Garner, Reading Law: The Interpretation of

Legal Texts 290, 291 (2013) (“Field preemption is much more

likely to be found when the federal statute deals with an area

that the federal government has traditionally controlled, such

as foreign affairs, international relations, and immigration.”).

29

DeCanas v. Bica, 424 U.S. 351, 357 (1976).

9

trading, which the Supreme Court has noted is “a

comprehensive regulatory structure to oversee the volatile and

esoteric futures trading complex.”30

The CFTC’s occupation of the subfield of DCM trading

is insufficient to preempt state gambling laws because of the

presumption against preemption. When Congress gave the

CFTC jurisdiction over swaps, there was no “clear and

manifest purpose” for federal law to supersede states’ “historic

police powers” over gambling regulation.31 After all, the

CFTC has no expertise in the sports gaming industry.32 If

Congress wanted the CFTC to serve as a kind of national sports

gaming commission, it would not have stated its intention “in

so cryptic a fashion.”33

Both Kalshi and the Majority argue that the

presumption against preemption is inapplicable because “the

federal government has regulated the derivatives market for

over a century.”34 Yet, the presence of federal regulation,

however longstanding, “does not by itself defeat the

30

Merrill Lynch, Pierce, Fenner & Smith, Inc. v. Curran, 456

U.S. 353, 356 (1982).

31

Rice, 331 U.S. at 230.

32

See West Virginia v. EPA, 597 U.S. 697, 729 (2022) (“When

[an] agency has no comparative expertise in making certain

policy judgments, we have said, Congress presumably would

not task it with doing so.”) (internal quotation marks omitted).

33

FDA v. Brown & Williamson Tobacco Corp., 529 U.S. 120,

123 (2000).

34

Maj. Op. 14.

10

application of the presumption.”35 The only federal law in this

area that touches on gaming is the Dodd-Frank Act’s “special

rule” for event contracts (Special Rule), which gives the CFTC

the authority to prohibit event contracts involving gaming.36

The Special Rule, however, has only existed since the passage

of Dodd-Frank in 2010, and can hardly be considered

longstanding. In addition, Dodd-Frank’s legislative history has

only a brief discussion of “gaming,”37 further highlighting the

lack of federal regulation in this field.

The question of whether the federal occupation of a

subfield can preempt state law, especially when the federal law

overlaps with an area traditionally dominated by the states,

cannot be answered by field preemption principles. Federal

law may fully occupy a discrete subfield while leaving adjacent

or overlapping fields to be governed under the conflict

35

Farina, 625 F.3d at 116. See also Wyeth v. Levine, 555 U.S.

555, 565 n.3 (2009) (applying presumption despite federal

regulations existing “for more than a century”).

36

7 U.S.C. § 7a-2(c)(5)(C)(i).

37

156 Cong. Rec. S5906–07 (2010).

11

preemption framework.38 Ultimately, the Majority errs

because it fails to recognize that DCM trading is a subfield and

disregards the presumption against preemption.

B.

The Majority also fails to reconcile its finding of field

preemption with the existence of two savings clauses in the Act

that preserve certain state law causes of action. 7 U.S.C. §

2(a)(1)(A) provides that (1) “[n]othing in this section shall . . .

supersede or limit the jurisdiction at any time conferred on . . .

regulatory authorities under the laws of the United States or of

any State” (state law carveout), and that (2) “[n]othing in this

section shall supersede or limit the jurisdiction conferred on

courts of the United States or any State” (state court

carveout).39 Such clauses are “fundamentally incompatible

with complete field preemption” because they indicate that

38

See Silkwood v. Kerr-McGee Corp., 464 U.S. 238, 248

(1984) (“If Congress has not entirely displaced state regulation

over the matter in question, state law is still preempted to the

extent it actually conflicts with federal law, that is, when it is

impossible to comply with both state and federal law, or where

the state law stands as an obstacle to the accomplishment of the

full purposes and objectives of Congress.” (internal citations

omitted)); see also Farina, 625 F.3d at 121 (rejecting field

preemption claim upon concluding that Federal

Communications Commission’s regulation of radiofrequency

emissions occupied the limited subfield of “areas of technical

standards and competitive market structure for cellular

service”).

39

7 U.S.C. § 2(a)(1)(A).

12

Congress envisioned a role for state law in the field.40 A Swiss

cheese-like field that allows for enclaves of state authority

cannot preempt state law because field preemption requires

complete occupation on the part of the federal government.

The Majority waves away the presence of these savings

clauses by noting that the state law carveout applies “except as

hereinabove provided” by the grant of exclusive jurisdiction to

the CFTC.41 In the Majority’s view, that prefatory clause

means that Congress intended to occupy the field of DCM

trading regulation because the state law carveout does not

apply to matters within the CFTC’s exclusive jurisdiction. The

Majority misses the point, however. It does not matter if § 2’s

preservation of state law causes of action is not meant to

infringe on the CFTC’s exclusive jurisdiction. The very fact

that Congress decided to allow room for state law means that

Congress chose to not completely occupy the field.

The Majority’s position is even weaker with regard to

the state court carveout. While true that the state law carveout

is restricted by the “except as hereinabove provided” language,

the state court carveout is in a completely different sentence.42

The text of the Act therefore places no limits on the carveout

for state court jurisdiction—it is absolute and completely

unaffected by the grant of exclusive jurisdiction to the CFTC.

For that reason, I disagree with the Majority’s holding that the

40

Farina, 625 F.3d at 121.

41

Maj. Op. 15 (citing 7 U.S.C. § 2(a)(1)(A)) (emphasis in

original).

42

7 U.S.C. § 2(a)(1)(A).

13

state court carveout “does not contravene the grant of CFTC’s

exclusive jurisdiction.”43

Consequently, I would hold that the presence of such

clauses is evidence of Congress’s intent to allow a certain

amount of complementary state regulation in this field.

Accordingly, field preemption does not apply.

IV.

Conflict preemption can occur if it is impossible to

comply with both state and federal law44 (impossibility), or if

state law “stands as an obstacle to the accomplishment and

execution of the full purposes and objectives of Congress”

(obstacle).45 Kalshi claims both forms of conflict preemption,

arguing that it is impossible to comply with both New Jersey’s

gambling laws and CFTC requirements, and that the

application of New Jersey’s gambling laws to Kalshi’s sports-

event contracts “subverts Congress’s aim of bringing futures

markets ‘under a uniform set of regulations.’”46

While the Majority does not address impossibility

preemption, it does agree with Kalshi that obstacle preemption

prevents New Jersey from regulating Kalshi’s sports-event

43

Maj. Op. 15.

44

See MD Mall Assocs., LLC v. CSX Transp., Inc., 715 F.3d

479, 495 (3d Cir. 2013).

45

Hillsborough Cnty., Fla. v. Automated Med. Lab'ys, Inc., 471

U.S. 707, 713 (1985).

46

Appellee Br. 30 (quoting Am. Agric. Movement, Inc. v. Bd.

of Trade of City of Chicago, 977 F.2d 1147, 1156 (7th Cir.

1992).

14

contracts. I would instead hold that neither form of conflict

preemption applies here. Kalshi can comply with both New

Jersey and federal law, and New Jersey’s gambling laws as

applied to Kalshi do not frustrate the congressional objectives

behind the Act.

A.

Kalshi contends that impossibility preemption applies

because New Jersey requires that the gaming it regulates “shall

only occur within the State”47 and because New Jersey bans

wagering on college sports events involving New Jersey

college teams or taking place in the state.48 In order to comply

with these requirements, Kalshi argues that it would have to

exclude New Jersey from contracts it offers in other states,

which would violate the CFTC requirement that a DCM

provide “impartial access to its markets and services.”49 I

disagree. The impartial access requirement does not mandate

that a particular market exist for event contracts.50 Congress

simply wanted the CFTC to regulate access to a market to the

extent it exists.51

In fact, the purpose behind the impartial access

requirement was to prevent DCMs from using discriminatory

access requirements, like the creation of exclusive membership

47

N.J. Admin. Code § 13:69O-1.2(e)(2).

48

N.J. Const. art. IV, § 7, ¶ 2(D).

49

17 C.F.R. § 38.151(b).

50

See Just Puppies, Inc. v. Brown, 123 F.4th 652, 664 (4th Cir.

2024).

51

Id.

15

standards that focus on high net worth.52 It has nothing to do

with ensuring that event contracts are available in all states.

Kalshi can still establish different categories of market

participants, such as a separate market for New Jersey

residents, as long as it does not “discriminate within [that]

particular category.”53 Kalshi has therefore not shown that it

is impossible to comply with both federal and state laws.

B.

The Majority states “that “[a]llowing New Jersey to

enforce its gambling laws and state constitution would create

an obstacle to executing the Act” because it would subvert

Congress’s aim of ensuring that futures markets operate under

a uniform set of regulations.54 While uniformity is an

important goal of the Act, “no legislation pursues its purposes

at all costs,” and it “frustrates rather than effectuates legislative

intent simplistically to assume that whatever furthers the

statute’s primary objective must be the law.”55 Such broad

purposes arguments “ignor[e] the complexity of the problems

52

See Core Principles and Other Requirements for

Designated Contract Markets, 75 Fed. Reg. 80572, 80579

n.51 (Dec. 22, 2010).

53

Id. at 80579. During oral argument, counsel for New Jersey

noted that Sporttrade is a company that offers event contracts

in the state and has been able to comply with both New Jersey

and federal regulations.

54

Maj. Op. 13.

55

Rodriguez v. United States, 480 U.S. 522, 525–26 (1987)

(emphasis in original).

16

Congress is called upon to address.”56 Courts cannot use the

Supremacy Clause “to elevate abstract and unenacted

legislative desires above state law.”57

The analysis of this issue should be grounded in the text

of the statute and relevant regulations. The Special Rule,

which was added to the Act following the passage of Dodd-

Frank,58 is the only provision in the statute that addresses

gaming contracts. Therefore, I must analyze this provision to

discern whether New Jersey’s gambling laws undermine

congressional objectives. The Special Rule states that the

CFTC “may determine that . . . [event] contracts . . . are

contrary to the public interest” if they involve “gaming.”59

Kalshi is correct that this statutory provision alone does not

prohibit the trading of gaming contracts in DCMs, as it merely

gives the CFTC the authority to prohibit them. The CFTC did

use that authority, however, enacting Rule 40.11(a)(1), which

prohibits DCMs from trading, or accepting for clearing, event

contracts that involve, relate to, or reference gaming.60 Under

the plain text of this regulation, Kalshi’s sports-event contracts

are being offered in violation of federal law. If gaming

contracts, such as sports-event contracts, violate federal law,

state gambling laws as applied to such contracts cannot be

conflict preempted. Far from undermining congressional

56

Bd. of Governors of Fed. Rsrv. Sys. v. Dimension Fin. Corp, 4

74 U.S. 361, 373–74 (1986) (internal quotation marks

omitted).

57

Va. Uranium, Inc. v. Warren, 587 U.S. 761, 778 (2019).

58

Pub. L. No. 111-203, 124 Stat. 1737 (2010).

59

7 U.S.C. § 7a-2(c)(5)(C)(i).

60

17 C.F.R. § 40.11(a)(1).

17

objectives, New Jersey’s gambling laws arguably complement

them.

The legislative history of Dodd-Frank also indicates

Congress’s general disdain for gaming contracts. While it is

important to be mindful “that the authoritative statement is the

statutory text,” and that “legislative history can be murky,

ambiguous, and contradictory,”61 I believe that the legislative

history can be useful in providing important context in this case

because of the paucity of references to gaming contracts in both

the Act and Dodd-Frank.

The congressional record for Dodd-Frank includes a

colloquy from then Senator Blanche Lincoln of Arkansas, who

said that the Special Rule’s purposes are “to prevent the

creation of futures and swaps markets that would allow citizens

to profit from devastating events,” “prevent gambling through

futures markets,” and “strengthen the government’s ability to

protect the public interest against gaming contracts and other

event contracts.”62 She continued:

The Commission needs the power to, and should,

prevent derivatives contracts that are contrary to

the public interest because they exist

predominantly to enable gambling through

supposed “event contracts.” It would be quite

easy to construct an “event contract” around

sporting events such as the Super Bowl, the

Kentucky Derby, and Masters Golf Tournament.

61

Sikkelee v. Precision Airmotive Corp., 822 F.3d 680, 697 (3d

Cir. 2016) (internal quotation marks and citation omitted).

62

156 Cong. Rec. S5906 (2010).

18

These types of contracts would not serve any real

commercial purpose. Rather, they would be used

solely for gambling.63

In short, Dodd-Frank’s history undermines Kalshi’s

obstacle preemption claim. Congress intended to prohibit

gambling on DCMs, and the CFTC effectuated that intention

through its enactment of Rule 40.11(a)(1). Kalshi asserts that

its sports-event contracts comply with this regulation because

the CFTC has not taken any action against its contracts. The

Majority similarly notes that “the CFTC has chosen not to

enforce its regulation against the type of sports-related event

contracts at issue here.”64 Kalshi and the Majority overlook

that agency inaction alone cannot preempt state law,65

especially not when that inaction constitutes a failure to

“adhere to its own rules and regulations.”66 While the CFTC

has recently issued an Advance Notice of Proposed

Rulemaking on regulating prediction markets,67 Rule

40.11(a)(1)’s prohibition of gaming contracts continues to be

in place. Accordingly, neither the CFTC’s failure to enforce

its own regulation nor nonexistent rules governing event

contracts are sufficient to coat Kalshi’s self-certified gaming

contracts with a sheen of legality. They cannot be a basis to

argue conflict preemption.

63

Id. at S5906–07.

64

Maj. Op. 7.

65

Fellner v. Tri-Union Seafoods, L.L.C., 539 F.3d 237, 247 (3d

Cir. 2008) (citing Puerto Rico Dep't of Consumer Affs. v. Isla

Petroleum Corp., 485 U.S. 495, 503 (1988); Sprietsma v.

Mercury Marine, 537 U.S. 51, 65–70 (2002)).

66

Reuters Ltd. v. FCC, 781 F.2d 946, 950 (D.C. Cir. 1986).

67

See Prediction Markets, 91 Fed. 12516 (Mar. 16, 2026).

19

Further, a federal law does not preempt state laws where

the activity regulated by the state is merely a peripheral

concern of the federal law.68 The lack of references to gaming

contracts in Dodd-Frank indicates that such contracts were a

peripheral concern when the Special Rule was enacted. This is

in contrast to New Jersey’s laws, which have the explicit

purpose of governing the gaming industry and are not intended

to intrude on federal regulation of the futures markets.69

Finally, Kalshi’s argument that New Jersey’s gambling

laws pose an obstacle to the accomplishment of Congress’s

goals behind the Act is undercut by the lack of a clear

congressional statement that the Special Rule was intended to

have preemptive effect. The Act contains both a preemption

and non-preemption provision, neither of which cover trading

on DCMs. 7 U.S.C. § 16(e)(2) specifies that the Act preempts

the application of state gaming laws to certain enumerated

transactions that are exempted or excluded from the Act.70

68

N.Y. Susquehanna & W. Ry. Corp. v. Jackson, 500 F.3d 238,

252 (3d Cir. 2007); see also Chi. & N.W. Transp. Co. v. Kalo

Brick & Tile Co., 450 U.S. 311, 317 (1981).

69

Ford Motor Co. v. Ins. Comm’r of Pa., 874 F.2d 926, 939

(3d Cir. 1989) (finding no implied preemption because “the

intent of the federal scheme was to regulate the operation of

federally insured thrifts,” and thus federal law “did not

preclude supplemental state regulations which . . . imposed a

restriction upon the affiliations that the thrift could have and

were designed more to regulate the insurance industry rather

than to control the operation of the savings and loan industry”

(alteration in original)).

70

7 U.S.C. § 16(e)(2).

20

Transactions “conducted on or subject to the rules of a

registered entity,” like a DCM, are not on the list of enumerated

transactions.71 7 U.S.C. § 16(e)(1) expressly states that the Act

does not preempt the application of state laws to any futures

contract conducted outside regulated exchanges like DCMs.72

Since Congress’s silence can be construed in more than one

way, I would apply the presumption against preemption and

interpret the lack of reference to DCM trading as weighing

against conflict preemption.

***

For these reasons, I would hold that Kalshi cannot

demonstrate a reasonable likelihood of success on the merits

on its preemption claims. I therefore respectfully dissent.

71

See id.

72

7 U.S.C. § 16(e)(1).

21