Maryland Judge Rules Against Kalshi in Potential Landmark Case for Prediction Markets

A judge in Maryland has ruled against Kalshi in its legal battle for the right to offer sports prediction markets in the state.

Kalshi had filed a lawsuit in the state against the Maryland Lottery and Gaming Control Agency and Commission after receiving a cease-and-desist order back in April. 

As reported by Event Horizon, Judge Adam Abelson refused to grant Kalshi a preliminary injunction in the case, which would have allowed the company to continue operations in Maryland. 

Judges in Nevada and New Jersey both granted injunctions in similar cases. Still, Judge Abelson went against the previous decisions, ruling that Kalshi had failed to show the “Commodity Exchange Act (CEA) preempts Maryland’s gaming laws.”

CEA Never Intended to Legalize Sports Betting

Sen. Blanche Lincoln was one of the key authors of the CEA amendment in 2010 and, at the time, stated that it was in no way intended to allow sports betting. 

Lincoln stated: “It would be quite easy to construct an ‘event contract’ around sporting events such as the Super Bowl, the Kentucky Derby, and Masters Golf Tournament. These types of contracts would not serve any real commercial purpose. Rather, they would be used solely for gambling.”

However, after signing up as a lobbyist for Kalshi last year, Lincoln has changed her stance. She recently submitted a letter to the Commodity Futures Trading Commission (CFTC) urging the regulator not to restrict the growth of sports prediction markets. 

In the letter, Lincoln wrote, “Sporting events like the Super Bowl also have strong commercial value because they have major impacts on advertising, apparel sales and the hospitality industry to name a few.”

This argument was successful in courts in Nevada and New Jersey, but Kalshi failed to convince Judge Abelson in Maryland. 

Maryland Builds Stronger Case Against Kalshi

In this case, Maryland cited a similar change in stance from Kalshi regarding sports event contracts. In a case arguing for the legality of political markets, Kalshi’s lawyers had stated that the outcomes of sporting events have no real economic significance. 

However, like Lincoln, the company now states that sporting events have real financial consequences and are therefore viable markets under the CEA. 

Maryland also cited a ruling in an abortion case in West Virginia, which held that federal authority didn’t automatically preempt West Virginia’s abortion restrictions.

Ruling’s Future Impact on Sports Event Contracts

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

The ruling, however, means that the company may be forced to either withdraw its operations from Maryland or apply for a sports betting license. 

It could set a precedent for other states to fight back against prediction markets that essentially offer the same services as sports betting. Seven states have issued cease-and-desist orders to Kalshi, while several others are reportedly monitoring legal proceedings. 

Following Kalshi’s legal victories in Nevada and New Jersey, companies such as DraftKings and FanDuel have been exploring the possibility of expanding into prediction markets. This ruling may slow down the urgency for sports betting companies to get involved. 

In addition, Polymarket, which declares itself the world’s largest prediction market platform, aims to re-enter the US market following the acquisition of QCEX, an exchange licensed by the CFTC. 

The case is far from concluded, as courts in New Jersey and Nevada have yet to make definitive rulings on the future legality of sports prediction markets. The ruling is a blow to Kalshi, however, and the first significant setback for the company’s rapid expansion.