---
type: source
title: "Third Circuit Rules 2-1 for Kalshi in New Jersey — First Federal Appellate Win on DCM Preemption"
author: "Yogonet International"
url: https://www.yogonet.com/international/news/2026/04/07/118450-kalshi-wins-new-jersey-appeal-in-first-federal-ruling-on-sports-event-contracts
date: 2026-04-07
domain: internet-finance
secondary_domains: []
format: article
status: unprocessed
priority: high
tags: [prediction-markets, regulatory, cftc, preemption, circuit-split, kalshi, new-jersey]
---

## Content

The U.S. Court of Appeals for the Third Circuit ruled 2-1 to uphold an injunction blocking New Jersey from enforcing its gambling laws against Kalshi's prediction market platform.

**The ruling:** Judge David J. Porter's majority opinion found federal law supersedes state regulation. "The relevant field is trading on a designated contract market (DCM), rather than gambling broadly" — federal law occupies this regulatory space. Conflict preemption also applies: NJ enforcement would interfere with Kalshi's CFTC-licensed DCM operations.

**Dissent:** Judge Jane Richards Roth argued Kalshi's offerings "are virtually indistinguishable from the betting products available on online sportsbooks" and cautioned against broadly applying preemption in areas historically regulated by states.

**What this creates:** A near-certain 3rd/9th Circuit split if the 9th Circuit rules for Nevada (as its panel appeared to lean during April 16 oral argument). Circuit split → SCOTUS review likely.

**The DCM field framing:** The 3rd Circuit narrowly defined the preempted field as "trading on a designated contract market" — not "prediction markets broadly" or "event contracts." This is a consequential scope distinction.

## Agent Notes

**Why this matters:** This is the first federal appellate court ruling on CFTC preemption of prediction market contracts. The 3-month legal battle just moved from preliminary injunctions to merits rulings. The field definition ("DCM trading") is the key legal contribution — narrower than what CFTC itself argued, and potentially consequential for on-chain protocols that are NOT DCMs.

**What surprised me:** The 3rd Circuit's field definition is actually NARROWER than CFTC's own argument. CFTC argued broad field preemption of event contracts; the court said the field is specifically "trading on a DCM." This creates an odd result: CFTC's own regulatory authority may extend further than the preemption protection it was trying to assert.

**What I expected but didn't find:** Any discussion of whether decentralized on-chain protocols (like MetaDAO) fall inside or outside the "DCM trading" preempted field. The ruling is entirely about CFTC-registered centralized platforms.

**KB connections:**
- [[futarchy-governed entities are structurally not securities because prediction market participation replaces the concentrated promoter effort that the Howey test requires]] — this ruling creates a different dimension: even if futarchy is not a security, is it regulated gambling under state law? DCM registration is the shield. MetaDAO is not a DCM.
- [[Ooki DAO proved that DAOs without legal wrappers face general partnership liability making entity structure a prerequisite for any futarchy-governed vehicle]] — entity structure matters; DCM registration is now also a shield question
- [[the DAO Reports rejection of voting as active management is the central legal hurdle for futarchy because prediction market trading must prove fundamentally more meaningful than token voting]] — this ruling is about CFTC preemption, not the Howey/DAO Report question. Different regulatory track.

**Extraction hints:**
- Claim: "Third Circuit's 'DCM trading' field preemption protects only CFTC-registered centralized platforms, leaving decentralized on-chain futarchy protocols exposed to state gambling law enforcement"
- Claim: "The 3rd/9th Circuit split on CFTC preemption creates near-certain SCOTUS review, with the outcome determining whether state gambling law can reach federally-registered prediction market platforms"
- Note for extractor: The 3rd Circuit dissent (Roth: "virtually indistinguishable from sportsbooks") is the strongest judicial articulation of the substance-over-form argument. Worth archiving separately as a challenged-by reference.

**Context:** Parallel to the 9th Circuit (Nevada) battle, which heard oral arguments on April 16 and is expected to lean the other way. Ohio has also fined Kalshi $5M. New York sued Coinbase/Gemini (S24). The prediction market regulatory battle is now multi-front and escalating.

## Curator Notes

PRIMARY CONNECTION: [[the DAO Reports rejection of voting as active management is the central legal hurdle for futarchy because prediction market trading must prove fundamentally more meaningful than token voting]] — though this ruling is on a different legal track (state gambling preemption, not securities classification), the DCM registration shield it establishes is a structural parallel

WHY ARCHIVED: First federal appellate merits ruling on prediction market preemption; the "DCM trading" field definition is a new legal concept with direct implications for how on-chain futarchy (not a DCM) is positioned

EXTRACTION HINT: Focus on (a) the narrow "DCM trading" field definition and what it excludes, (b) the circuit split's SCOTUS pathway, (c) the implication that on-chain decentralized protocols may sit in a regulatory gap between DCM protection and state gambling enforcement
