Don’t bet on it: MD eyes action against election ‘trading’ on prediction markets

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Maryland residents wagering on the outcome of elections using online prediction markets could find themselves on the wrong side of election law and potentially face criminal prosecution, state officials say.

Hundreds of thousands of dollars have already been spent this cycle by users betting on the winners of every congressional and gubernatorial primary in Maryland on prediction market platforms such as Kalshi and Polymarket.

But wagering on elections in the state is illegal. State Elections Administrator Jared DeMarinis said residents “trading” on the outcome of races are essentially making illegal wagers.

“To me, they are making a wager. They are making a bet,” DeMarinis said. “Putting money in the prediction market, saying a candidate is likely to win or lose the election, is making a wager.”

The Commodity Futures Trading Commission, the federal agency in charge of regulating the U.S. derivatives market, says that any trades made on prediction markets are “swaps, not wagers,” which fall under its jurisdiction – not the states’.

That disagreement has led to legal disputes across the country between the commission and states that want to enforce their gambling laws on prediction markets. So far, the CFTC has sued eight states after the states pursued litigation against prediction platforms.

Those states include Minnesota, the first state to pass legislation banning prediction markets, and most recently New Mexico, which the commission sued after the state filed suit against Kalshi.

At the end of April, 41 state attorneys general, including Maryland’s Anthony Brown, filed a formal comment urging CFTC Commissioner Michael Selig to hand jurisdiction over sports-related trades to the states, after the commission released an advanced notice of proposed rulemaking on prediction market regulation.

The CFTC’s exclusive jurisdiction over swaps and its eagerness to defend it poses a dilemma for DeMarinis when it comes to enforcing Maryland’s election gambling law on prediction market users. And the commission is not backing down.

“Maryland can see the actions the Commission has taken against other states who have tried to bypass federal law and attempted to regulate our markets,” a CFTC spokesperson said. “We plan to continue defending our jurisdiction.”

Mark Graber, a professor at the University of Maryland Francis King Carey School of Law, noted there is plenty of precedent when it comes to conflicts between state and federal law, but the case of regulating prediction markets is still hazy.

“On the one view, yes, the federal government has exclusive jurisdiction, but we never intended to include prediction markets,” Graber said. “For a question of federal statutory interpretation: Did we mean this?”

In the midst of ongoing legal challenges and debates, options are limited to catch up to the rapidly growing prediction market industry. Some Maryland officials have tried, so far unsuccessfully.

“At the federal and state level, we are standing up to the oligarchs and day-trading scam artists who seek to rig our democracy and profit from the fix,” said Rep. Jamie Raskin (D-8th), who introduced legislation with Sen. Jeff Merkley (D-Ore.) in March to ban prediction market trading on elections, as well as sports, acts of war and other government actions.

“Prediction markets like Kalshi and Polymarket reduce our common future to gambling odds in contrived insider games,” he said. “Our bill empowers states, not President Trump’s stacked-and-packed CFTC, to regulate the risky business of gambling with America’s future.”

Requests last week to Polymarkets and to Kalshi for comment were not returned.

Fifteen states introduced bills this year to regulate prediction markets, but Maryland was not one of them, according to the National Conference of State Legislatures. But Gov. Wes Moore (D) issued an executive order in April banning state employees from placing bets on prediction markets using insider information.

Moore’s order is likely insulated from CFTC retaliation, according to Graber. “If we can forbid federal employees from engaging in all political activities – that’s the Hatch Act – we can certainly forbid state employees from gambling on state elections,” he said.

During an appearance on HBO’s “Real Time with Bill Maher” in April, Moore touted the order and noted that he could “walk away with about $4 million” for simply placing a $250,000 wager and “tanking the race” that the market predicts he should win.

DeMarinis shared Moore’s concern that such wagering could be susceptible to “insider trading” — candidates or campaign workers wagering on outcomes based on knowledge that is not in the public domain or by those who have the ability to directly affect the outcome in a way that reaps a financial benefit.

“This is something that could have real implications for the integrity of elections,” DeMarinis said. “It goes right to the heart of our electoral process.”

With the primary election approaching and legal battles over prediction markets continuing to unfold nationwide, Maryland officials are still weighing what, if anything, they can do to enforce the state’s prohibition on election wagering.

“Whether or not I go after the prediction markets — I don’t know,” DeMarinis said. “This is something we are looking at and it’s definitely under review.”

Will Hammann is a general assignment news and data reporter for Maryland Matters. Bryan Sears covers the governor and General Assembly, state politics and transportation for Maryland Matters.