Judge lets MD regulator enforce sports betting laws against prediction market Kalshi — for now

The prediction market platform Kalshi suffered its first legal defeat — albeit a tentative one — earlier this month, as a federal judge declined to stop Maryland’s gambling regulator from requiring that the company obtain a sports gambling license.

U.S. District Judge Adam Abelson on Aug. 1 denied Kalshi’s request for a preliminary injunction against the Maryland Lottery and Gaming Control Commission, which in April sent a cease-and-desist letter ordering the company to stop offering sports “event contracts.”

The ruling is the first that Kalshi has lost after judges in Nevada and New Jersey earlier this year granted its requests for preliminary injunctions against state gambling regulators.

Kalshi argues that it is a “designated contract market,” not a sportsbook like FanDuel or DraftKings, and should be regulated by the federal Commodity Futures Trading Commission, not by state gambling agencies. It sued two weeks after Maryland Lottery and Gaming said its sports event contracts were “indistinguishable” from sports bets.

Abelson wrote that “Kalshi has failed to show a likelihood of success on the merits of its claim that the Commodity Exchange Act preempts Maryland’s gaming laws.”

State gambling laws and the Commodity Exchange Act work “in tandem,” Abelson wrote.

“It is Kalshi’s desire not to comply with Maryland law and presumably incur some additional compliance costs — not the existence of Maryland consumer protection laws themselves — that creates the situation Kalshi professes to worry about,” Abelson wrote.

“So long as Kalshi obtains a license and complies with Maryland sports gambling laws, those laws would not pose an obstacle to Kalshi making the sports gambling portion of its platform available to users in Maryland.”

Kalshi is appealing the ruling to the U.S. Court of Appeals for the Fourth Circuit and filed a motion for an immediate injunction pending appeal. Its opening appeal brief is due Sept. 15, and a virtual status conference with Abelson is scheduled for Wednesday afternoon.

“We are disappointed with the court’s decision and have moved for an immediate stay and appeal of the ruling,” a Kalshi spokesperson stated in an email. “We are on the right side of the law, and ultimately expect to prevail in this fight.”

The company only began offering sports contracts in January, ahead of the Super Bowl. It also allows people to enter contracts related to elections, awards shows, economic events and more. It considers these contracts to be commodities, like oil or wheat.

“If we are gambling, then I think you’re basically calling the entire financial market gambling,” Kalshi CEO Tarek Mansour told Axios in April.

Maryland Lottery and Gaming is forgoing enforcement of state gambling law against the company at least until Wednesday’s hearing, according to court records. A spokesperson for the agency declined to comment.

Kalshi has close ties to the Trump administration and has expressed the desire to be regulated federally, rather than on a state-by-state basis.

In January, Donald Trump Jr. was named a strategic adviser to the company. A Kalshi board member and shareholder, Brian Quintenz, was a CFTC commissioner during Trump’s first term, and is the president’s nominee to lead the commission. His nomination has prompted conflict-of-interest concerns among members of Congress, according to reports.

Milbank, the firm representing Kalshi, agreed to a deal with the Trump administration to provide $100 million worth of pro bono support for the president’s priorities in order to avoid an executive order like those targeting Paul Weiss, WilmerHale and other firms.

Separately, Crypto.com filed a lawsuit after receiving a similar cease-and-desist order from Maryland Lottery and Gaming. Crypto.com, however, did not ask for a preliminary injunction. The state is due to respond to its complaint by Sept. 26 after receiving multiple extensions.