A federal judge in Maryland ruled against Kalshi in their legal action against the state.
Earlier this year, Maryland was one of seven states that sent cease and desist letters to the prediction market site. The states claimed Kalshi was operating an unlicensed and unregulated online sports betting operation through their sports contracts.
Consequently, Kalshi sued some of those states, arguing that the site is already subject to federal law. The Commodity Futures Trading Commission already regulates Kalshi’s prediction contracts. Thus, Kalshi argued that the state regulators were overstepping their bounds.
In April, Kalshi filed a lawsuit against the Maryland Lottery and Gaming Control Commission. They sought an immediate temporary restraining order and an injunction hearing. Kalshi used this tactic in successful lawsuits against Nevada and New Jersey regulators.
However, U.S. District Judge Adam Abelson ruled the company shouldn’t have an issue getting a Maryland sports betting license. As expected, Kalshi is appealing the ruling.
Gaming Attorney Thought Outcome Was Predictable
On Twitter/X, gambling attorney Daniel Wallach said the ruling could be seen coming from a mile away.
Wallach pointed to the exchange during May 28 oral arguments as the main clue.
“Remember, Kalshi wanted to frame the preemtpion issue much more broadly – i.e, that the [Commodity Exchange Act] granted the CFTC exclusive jurisdiction over “all” contracts traded on its exchanges,” wrote Wallach. “Judge Abelson was having none of that.”
Abelson pointed to congressional intent as the burden of proof for preemption.
According to Wallach, once Abelson made that distinction, Kalshi stood very little chance of a favorable decision.
Decision Creates Larger Problems For Kalshi
The ruling gives Maryland regulators the ability to enforce their cease and desist letter, possibly bringing Kalshi offline in Maryland. But that creates other problems that seriously hurts the company’s chances of operating at all.
According to a report from SBC Americas, Kalshi said it would take months and tens of millions of dollars to develop geolocation software that could prohibit Marylanders from accessing their site.
Additionally, Maryland sports betting law says wagers must stay within the state. Thus, Kalshi could only allow Maryland users to trade contracts with other Maryland users.
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