A coalition of 34 states, along with D.C. and the Northern Mariana Islands, is urging a federal appeals court to reject what they describe as a legal sleight of hand — one that allows companies like Kalshi to sidestep state gambling laws by rebranding sports betting as “event contracts” on federally regulated exchanges.
In an amicus brief filed Tuesday in the Third Circuit Court of Appeals, the states backed New Jersey in its ongoing legal fight with Kalshi, a platform that lets users wager on outcomes — as outlined in the brief — like whether the Pittsburgh Steelers will win more than eight games or if the Ravens will win the Super Bowl. Kalshi calls these trades “event contracts.” The states call it sports betting.
“Stripping away the semantics, this case most directly concerns gambling on sports,” according to the brief, which is led by Nevada Attorney General Aaron Ford and Ohio Attorney General Dave Yost.
Kalshi argues that because it is a registered exchange overseen by the Commodity Futures Trading Commission (CFTC), state regulators have no authority to intervene. The Commodity Exchange Act, Kalshi claims, trumps state gambling law when applied to markets structured as federally regulated derivative contracts.
“It’s no surprise that individual states would take this position. Kalshi is regulated at the federal level by the Commodity Futures Trading Commission, and we will continue to operate under their jurisdiction,” said a Kalshi spokesperson in a statement. “A cursory review of the facts shows that Kalshi is highly regulated, under a set of laws and regulations deeply concerned with fairness and safety for market participants.”
No sale
The states aren’t buying it.
They say Kalshi is exploiting the law to create a loophole big enough for any slow-footed fullback to get through — one that would allow a gambling operator to bypass age limits, licensing, and consumer protection requirements simply by using the right legal label.
“When Congress removes the States’ historic police powers, it does not whisper in the dark of night,” the brief states. “Rather, courts expect Congress to speak clear as day when it intends a dramatic shift in our country’s traditional balance of power.”
The brief also raises alarms about real-world consequences. Kalshi accepts users as young as 18. But many states set the legal gambling age at 21 — a rule Kalshi would bypass under its current model.
According to the brief, this shift could accelerate gambling problems, particularly among younger adults. Ohio’s data shows the number of at-risk or problem gamblers nearly doubled in five years. Calls to the state’s gambling hotline jumped 55% in 2023. A Rutgers study found that one in five people surveyed aged 18–24 were at high risk for gambling problems.
According to the states, Kalshi is pointing to what it calls the Commodity Exchange Act’s “detailed requirements for exchanges to maintain good standing as designated contract markets” as a buffer to the above.
But the states counter that CFTC rules were designed for financial markets — not sports betting — and lack the background checks, responsible gambling programs, and enforcement tools required by state law.
“The result of such loose processes will be to have individuals who would be unable to clear state-law hurdles running de facto sports books throughout the country, immune from the States’ regulation,” the brief warns.
The case is currently on the Third Circuit docket through New Jersey’s appeal of a federal court decision that granted Kalshi a preliminary injunction, in an action initiated by Kalshi against New Jersey regulators, allowing it to continue operating in New Jersey during the pendency of the case.
