Federal judge sides with Maryland in Kalshi sports prediction market dispute

A legal showdown over the classification of sports-based prediction markets escalated on Friday as a federal judge in Maryland rejected Kalshi’s attempt to shield its operations from state regulation. The ruling marked a departure from previous decisions in New Jersey and Nevada, where courts had blocked regulators from enforcing sports betting laws against the company.

U.S. District Judge Adam B. Abelson rejected Kalshi’s request for a preliminary injunction against Maryland’s Lottery and Gaming Control Agency and Commission, finding that the Commodity Exchange Act (CEA) does not clearly preempt state regulation of sports wagering.

The decision paves the way for continued state-level enforcement and introduces a circuit split that could ultimately draw the attention of the U.S. Supreme Court.

Kalshi, which allows users to trade on yes-or-no outcomes related to sports events, such as whether a Major League Baseball team will win the championship, argued that its offerings fall under the exclusive jurisdiction of the Commodity Futures Trading Commission (CFTC).

The company maintains that its contracts are distinct from gambling because they do not use traditional odds-making mechanisms. However, Judge Abelson concluded that the CEA does not "clearly and manifestly" strip states of their authority to regulate such activity as sports betting.

The Maryland case follows cease-and-desist letters issued to Kalshi by the Maryland regulator earlier this year. Kalshi responded by filing for an injunction, seeking to continue operating without a state license.

In contrast to Abelson’s ruling, federal judges in Nevada and New Jersey had earlier granted preliminary injunctions to Kalshi, siding with the company’s interpretation that the CEA provides the CFTC with exclusive regulatory oversight of its platform.

Judge Abelson noted the longstanding ability of states to regulate gambling and cautioned against interpreting federal preemption. He noted that allowing Kalshi to operate outside state oversight could have wider implications, including undermining the Indian Gaming Regulatory Act (IGRA), which enables tribal governments to oversee sports betting and gaming on their lands.

A coalition of tribal groups from California has filed a separate lawsuit against Kalshi, arguing that the company’s sports-event contracts infringe on tribal gaming rights.

The ruling also comes amid uncertainty at the federal level. Kalshi board member Brian Quintenz, considered a candidate to lead the CFTC under the Trump administration, recently had his nomination put on hold by the White House.

Meanwhile, Kalshi’s chief competitor, Polymarket, has signaled plans to reenter the U.S. market through the acquisition of a CFTC-registered exchange, potentially challenging Kalshi’s market share regardless of the legal outcome.

While Kalshi has already filed an appeal to the U.S. Court of Appeals for the Fourth Circuit, the conflicting rulings across multiple federal courts suggest the issue could escalate to the Supreme Court.