Kalshi Questioned by Maryland Court Over Conflicting Arguments

A Maryland federal court grilled Kalshi’s lawyers over the company’s controversial sports prediction markets this week. 

The legal battle centers on a cease-and-desist letter sent by the Maryland Lottery and Gaming Commission to Kalshi, ordering them to close these markets in the state. The operators are arguing that only the Commodity Futures Trading Commission (CFTC) has the authority to enforce the order, but Judge Abelson wasn’t buying it.

The federal judge heard arguments from both sides but put a spotlight on Kalshi’s shifting legal arguments. He pointed to Kalshi’s legal battle over election prediction markets, where part of their argument claimed that sports betting shouldn’t fall under the CFTC’s authority since it has no real economic significance. 

Since that lawsuit, Kalshi has begun to argue that sports betting, in the form of prediction markets, should be considered an included commodity, making the CFTC the sole regulator of the industry. 

Judge Abelson also questioned whether the federal regulator has the authority to override the states. Sports event contracts were a topic of conversation as far back as 2010, but lawmakers decided that the CFTC should reject them, as they are contrary to the public interest. 

While Kalshi argued that the sports betting legal status means the intent of that decision has changed, the Judge pointed out that this was due to the heavy regulations around the industry. 

All Eyes on Maryland

While the federal court is only focused on the battle between Kalshi and the Maryland Lottery and Gaming Commission, the decision will have a national impact. Many states with legal sports betting markets have taken action against Kalshi and sports prediction markets. Some have filed lawsuits, written letters to the CFTC, or opened investigations since the operators' March Madness market generated massive revenue numbers.

Kalshi has managed to have the upper hand in other court cases, with judges agreeing that the CFTC should have the final say. However, that doesn’t seem to be the case in Maryland. If Kalshi loses this battle, it will likely mean other states will have a new avenue to force out the operator.

Expect to see the case draw attention from across the country, and Kalshi fights for its survival.