Kalshi Challenges Maryland’s Ban on Its Sports Event Contracts

Prediction market operator KalshiEX LLC (Kalshi) has escalated its legal battles against state regulators by filing a lawsuit in the United States District Court for the District of Maryland. This move targets the Maryland Lottery and Gaming Control Commission (MLGCC), which earlier this month issued a cease-and-desist order aimed at halting Kalshi’s operations within the state.

The core of the dispute lies in Maryland’s stance that Kalshi’s sports-event contracts fall under the category of sports betting. According to the order issued by MLGCC Director John Martin, “Kalshi is operating in Maryland and is offering and conducting what is, in fact, wagering on sporting events. However, Kalshi does not hold a sports wagering license issued by the Commission, its wagers have not been approved by the Commission, and it is not otherwise authorized under Maryland law to offer wagers on sporting events.”

Kalshi Seeks Federal Protection for Its Operations

In response, Kalshi is seeking both a temporary restraining order and a preliminary injunction to prevent Maryland from enforcing the order. The company argues that its contracts are not traditional sports wagers but rather federally regulated financial instruments. Kalshi’s position is that these offerings fall under the jurisdiction of the Commodity Futures Trading Commission (CFTC), which has authorized the platform.

“Kalshi is unconstitutionally threatening to prohibit trading of Plaintiff KalshiEX LLC’s (Kalshi) sports-event contracts in Maryland, even though those contracts are authorized by the Commodity Futures Trading Commission (CFTC),” the lawsuit asserts. Kalshi’s legal team emphasizes that the CFTC was granted “exclusive jurisdiction” by Congress to oversee trading on federally designated exchanges such as Kalshi.

The situation echoes similar legal challenges the company is currently facing in New Jersey and Nevada. Kalshi filed lawsuits against both state regulators in late March after receiving similar cease-and-desist notices. In Nevada, the court granted Kalshi temporary relief, though proceedings in New Jersey have proven more contentious. New Jersey Attorney General Matthew Platkin noted, “There is no doubt that if the Commodity Exchange Act (CEA) applies to Kalshi’s sports wagers, Kalshi must comply with the CEA in order to list them on a CFTC-designated market. But it cannot do so in violation of state law.”

Wider Implications and Political Ties

Kalshi’s ongoing legal clashes raise broader questions about the regulatory boundaries between state gambling laws and federally sanctioned financial markets. At the heart of the debate is whether prediction markets offering sports-event contracts should be treated as state-regulated gambling products or federally regulated futures.

Complicating matters further are concerns surrounding the 1961 Federal Wire Act, which restricts interstate sports betting, and the CFTC’s own Rule 40.11(a)(1), which prohibits certain types of event contracts, including those involving unlawful activities.

So far, at least six states have issued cease-and-desist notices to Kalshi, including Ohio, where regulatory attention appears to be intensifying. Among the three companies named in Maryland’s recent order—Kalshi, Robinhood, and the North American Derivatives Exchange—only Kalshi has filed a legal challenge.

Kalshi also holds some notable political connections. In January, Donald Trump Jr. was appointed as a strategic advisor to the company, followed by President Trump’s February nomination of Brian Quintenz—formerly a Kalshi board member—as the new head of the CFTC.

As the courtroom battles unfold, industry observers and legal analysts continue to monitor whether the courts will determine prediction markets to be a protected form of financial exchange or subject them to the same restrictions as state-regulated gambling.

Source:

KalshiEx, NADE Sue to Keep Selling Sports Contracts in Maryland, news.bloomberglaw.com, April 22, 2025.