Chavdar Vasilev is a gambling news writer with several years of experience in the iGaming industry. He started creating promotional content but soon found he loved reporting on the industry itself. Since then, he’s delivered...
Read Full BioIn the ongoing legal battle between event prediction platform Kalshi and the Maryland Lottery and Gaming Control Commission (MLGCC), the Maryland federal court questioned Kalshi’s conflicting positions regarding whether sports betting event contracts fall under federal jurisdiction.
Through an X thread, US gaming and sports betting attorney Daniel Wallach shared key exchanges between the court and Kalshi lawyers.
Judge Abelson specifically challenged the platform on why it has changed its stance on sports event contracts compared to its arguments in its case against the Commodity Futures Trading Commission (CFTC).
The judge also stressed a key issue, whether Congress intended to preempt state regulations for sports event contracts.
To gain further clarity, Judge Abelson requested supplemental briefings from both sides to clarify how Kalshi’s statements in previous cases should inform the court’s view.
Court Challenges Kalshi’s Conflicting Legal Positions
Kalshi has launched a series of lawsuits against several state regulators, including MLGCC. The lawsuits are a result of cease-and-desist letters from MLGCC and the others, who argue that the platform is conducting illegal gambling through its sports prediction event contracts.
Kalshi argues that the contracts, essentially wagers, are legitimate derivative contracts. Those contracts are overseen and regulated by the CFTC, not state gambling regulators. However, that position contradicts what Kalshi argued in a separate federal case against CFTC over political event contracts.
In this case, Kalshi argued that outcomes of sporting events have no real economic significance. They serve only for amusement and do not qualify as “excluded commodities” under the Commodity Exchange Act (CEA).
Under CEA, to be an “excluded commodity”, an event’s outcome must be beyond the parties’ control and “associated with a financial, economic, or commercial consequence.” Previously, Kalshi has even argued that contracts involving games are not something the platform would want to list, as they don’t have any economic value.
Now, Kalshi claims its sports event contracts qualify as “event contracts” under CEA. The platform claims that sporting events do have financial implications, such as increased TV viewership and advertising revenue.
As Wallach points out in another X post, a significant flaw in that argument is that the financial consequences related to advertising or broadcasting do not mean the event’s outcome is economically significant. A key question is whether the result of the sports event has financial or commercial consequences.
Kalshi’s prior narrow interpretation of “gaming” conflicts with its current broad claims about economic consequences, creating a critical legal inconsistency.
Court Questions CFTC’s Exclusive Jurisdiction Over States
A potentially key question raised by Judge Abelson is what the language of CEA intends. The judge questioned if the “exclusive jurisdiction” language in Section 2(a)(1)(A) means that CFTC jurisdiction is “exclusive” only regarding federal agencies, and not state agencies (including MLGCC).
Abelson also highlights the phrase “except as hereinabove provided” in Section 2(a)(1)(a), which he interprets as “unless otherwise stated.”
He further questioned whether the following savings clause indicates that Congress did not intend to override or restrict state laws. The clause states that nothing in the law should override regulatory authority granted to federal and state agencies.
The legislative history indicates that in 2010, Senator Lincoln expressed concerns that the CFTC should prevent contracts contrary to the public interest. He warned that sports event contracts had no commercial value and could only be tools for gambling purposes.
Kalshi acknowledged that Lincoln’s statements likely indicated Congress’s intent at the time. However, it argued that the status of sports betting “has changed dramatically since 2010.” Today, it is lawful in most states, including Maryland. Kalshi continued to say that the country’s opinion on whether sports betting is contrary to the public interest has changed since 2010.
In response, Ableson pointed out that the likely reason is that sportsbooks are heavily regulated. They must also ensure that people don’t get addicted. The court emphasized that state gambling laws are carefully created with strict regulatory oversight.
Could Judicial Estoppel Apply?
The court points out that Kalshi previously stated that sports event contracts do not qualify as “swaps” (commodities) when it suited their position in the CFTC case. However, now it says they are.
If the court determines that Kalshi is attempting to change its position to gain an unfair advantage, it may apply the doctrine of judicial estoppel. That is a legal principle that prevents a party from contradicting earlier statements in court, ensuring fairness and consistency.
Therefore, if the court applies the judicial estoppel, Kalshi won’t be able to claim that the contracts are permitted under federal law, as they’ve already argued they aren’t in the CFTC case.
That could be a pivotal development as it could seriously weaken Kalshi’s defense that federal law protects it against state gambling laws. As a result, Maryland (and other states) could receive more power to shut down or regulate Kalshi’s sports-event betting contracts.
Potential Ripple Effects of a Favorable Ruling for Kalshi
The results of this case could have significant implications for Kalshi elsewhere. The platform has already secured some legal victories. Federal courts in New Jersey and Nevada have granted it temporary injunctions against the state’s gambling regulators. These injunctions could become permanent if there is a favorable outcome in the Maryland case.
If Abelson rules that Kalshi’s sports events are explicitly under CFTC regulations, it would represent a significant victory for the platform.
It would exempt Kalshi from state-level gambling regulations and solidify its regulatory framework at the federal level.
Furthermore, upcoming leadership changes at the CFTC could further help Kalshi.
Donald Trump’s nominee for CFTC Chairperson, Brian D. Quintentz, currently sits on the Kalshi board. If elected, he has indicated that he will resign from Kalshi. He will also recuse himself from any matters surrounding the company for a year.
While Quintentz has recused himself, his familiarity with the event predictions could influence the agency’s approach to oversight of Kalshi.
Notably, the CFTC has so far remained inactive in the legal battles between Kalshi and state regulators. Despite requests to intervene from some states, including Tennessee and Arizona, the agency has yet to act.
