---
type: source
title: "3rd Circuit preliminary injunction: CEA preempts state gambling laws for CFTC-licensed DCMs (2-1 ruling)"
author: "Holland & Knight / Courthouse News"
url: https://www.hklaw.com/en/insights/publications/2026/04/federal-appeals-court-cftc-jurisdiction-over-sports-event-contracts
date: 2026-04-06
domain: internet-finance
secondary_domains: []
format: article
status: null-result
priority: high
tags: [prediction-markets, regulatory, kalshi, 3rd-circuit, preemption, preliminary-injunction, new-jersey]
extraction_model: "anthropic/claude-sonnet-4.5"
---

## Content

United States Court of Appeals for the Third Circuit issued a 2-1 preliminary injunction ruling on April 6, 2026, in KalshiEX LLC v. Flaherty (New Jersey).

Opinion authored by Judge David J. Porter, joined by Chief Judge Michael A. Chagares. One dissent.

Key holdings:
1. Kalshi's contracts are "swaps" under the Commodity Exchange Act
2. The CEA grants CFTC exclusive jurisdiction over trades on CFTC-designated contract markets
3. Federal field preemption AND conflict preemption together shield Kalshi from state regulation
4. State laws that "directly interfere" with trading on CFTC-licensed DCMs are preempted

IMPORTANT LIMITATION: This is a preliminary injunction ruling — the court found only a "reasonable likelihood of success," not a merits determination. The case returns to district court for full merits proceedings. Federal Register publication confirms ANPRM comments due April 30, which coincides with the ongoing regulatory flux this ruling acknowledges.

The 2-1 split is significant — one judge disagreed on the preemption question, suggesting this is not settled law even at the appellate level.

Panel was partially Trump-appointed. Ruling came 5 days before the Arizona federal district court TRO (April 10) and 10 days before the 9th Circuit oral argument (April 16).

## Agent Notes

**Why this matters:** First federal appellate court to hold that CEA preempts state gambling laws for CFTC-licensed DCMs. This is the doctrinal precedent the Arizona TRO judge relied on (finding CFTC "likely to succeed on merits"). However, the "preliminary injunction, not merits" limitation means the 3rd Circuit finding is not binding precedent — it's a strong signal about how courts may rule, not a final determination.

**What surprised me:** The 2-1 split. Previous session expected this would be unanimous or close to unanimous given the CFTC's aggressive framing. One dissent is significant — it's the seed of the circuit split argument for SCOTUS cert if the 9th Circuit comes out differently.

**What I expected but didn't find:** The dissent's reasoning. The dissent would likely contain the strongest arguments for state preemption, which is what I'd want to see to evaluate the durability of the majority's reasoning.

**KB connections:**
- `cftc-licensed-dcm-preemption-protects-centralized-prediction-markets-but-not-decentralized-governance-markets` — DIRECT confirmation at appellate level, with preliminary-injunction caveat
- `prediction-market-scotus-cert-likely-by-early-2027` (session 18 claim candidate) — the 3rd Circuit preliminary ruling + upcoming 9th Circuit argument + 2-1 split all strengthen this

**Extraction hints:** Two claims: (1) 3rd Circuit finds federal field + conflict preemption shields CFTC-licensed DCMs from state gambling law — this is a confirmation claim with important scope qualifier (preliminary injunction only); (2) The 2-1 split creates an intra-circuit disagreement that, combined with circuit-level variation, strengthens the SCOTUS cert argument. The second claim is the more original KB addition.

**Context:** Holland & Knight is a law firm covering prediction market litigation — sophisticated legal analysis. The "swaps" classification is legally significant: if Kalshi's contracts are swaps, the CEA's exclusive jurisdiction over swaps trading is the preemption hook. This differs from the "event contracts" framing that the CFTC uses in its ANPRM — the legal theories are not entirely aligned.

## Curator Notes

PRIMARY CONNECTION: `cftc-licensed-dcm-preemption-protects-centralized-prediction-markets-but-not-decentralized-governance-markets`
WHY ARCHIVED: First appellate-level CEA preemption holding; 2-1 split creates path to circuit split; preliminary injunction limitation is critical caveat for accurate KB representation
EXTRACTION HINT: Be precise about the preliminary injunction vs. merits distinction — the KB needs to reflect the correct doctrinal weight; the 2-1 split is the new analytical point; write as confirmation+caveat claim
