Kalshi Files Lawsuit Against Maryland Lottery and Gaming Control Commission

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Prediction market operator Kalshi has filed its third lawsuit against a state regulator, this time taking the Maryland Lottery and Gaming Control Commission (MLGCC) to court.

Battle Between State Regulators and Prediction Market Operators

Tensions continue to escalate between state regulator agencies and prediction market operators. Kalshi has filed a lawsuit against the Maryland Lottery and Gaming Control Commission (MLGCC), arguing that the regulator is “unconstitutionally threatening to prohibit trading of Kalshi sports-event contracts” in the state.

The latest shot came when Kalshi filed a motion in the United States District Court for the District of Maryland Northern Division against the MLGCC. Kalshi’s new lawsuit comes as a response to a recent cease-and-desist order issued by Maryland earlier this month.

At the center of the dispute is whether sports-event contracts constitute state-regulated sports bets or fall under federally regulated futures contracts; the MLGCC sides with the former view. While Maryland targeted three prediction market operators, Kalshi is the only one that has chosen to take legal action.

In its cease-and-desist letter, Maryland Lottery and Gaming Control Agency director John Martin wrote

“Kalshi is operating in Maryland and is offering and conducting what is, in fact, wagering on sporting events. However, Kalshi does not hold a sports wagering license issued by the Commission, its wagers have not been approved by the Commission, and it is not otherwise authorized under Maryland law to offer wagers on sporting events.”

In its lawsuit, Kalshi argues that the MLGCC does not have the authority to ban trading of its sports-event contracts, as these contracts are approved by the Commodity Futures Trading Commission (CFTC). Congress has granted the federal agency ‘exclusive jurisdiction’ to oversee and regulate trading on federally recognized exchanges like Kalshi.

Maryland is Not Alone in its Fight Against Kalshi

At least six states have issued cease-and-desist orders to Kalshi. In response, the company has filed lawsuits against New Jersey, Nevada, and Maryland, with Ohio regulators expecting they might soon face similar action. Kalshi scored an early victory in its Nevada case, securing temporary relief from the state’s cease-and-desist order.

New Jersey, however, may be a tougher challenge for Kalshi. The state has already filed an opposition to Kalshi’s motion, with New Jersey Attorney General Matthew Platkin presenting an argument to the court.

Platkin argued that New Jersey, like many other states, has regulated gambling for more than 125 years. He stated that Kalshi believes it is exempt from these laws because it offers sports wagers in a new format — event contracts — on a market designated by the CFTC.

Platkin asserted that Kalshi was mistaken, emphasizing that even if the Commodity Exchange Act (CEA) applied to Kalshi’s sports wagers, the company must still comply with the CEA to list them on a CFTC-regulated market, and could not do so in violation of state law.

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