Prediction Market Kalshi Suffers Major Setback In Maryland
In Maryland, Judge Adam Ableson denied Kalshi's motion for a preliminary injunction against the state's gaming regulator. The Maryland Lottery and Gaming Control Commission (MLGCC) had sent the prediction market operator a cease-and-desist letter arguing its sports event contracts were not legal in the Old Line State.
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Kalshi Failed To Show Congressional Intent
In Judge Abelson's decision, released Friday, he stated that Kalshi "failed to show a likelihood of success" in its lawsuit against the MLGCC. Kalshi had sued the MLGCC after receiving the aforementioned cease-and-desist letter, arguing that it was regulated by the Commodity Futures and Trading Commission (CFTC), and the state's gaming commission had no jurisdiction over Kalshi.
Throughout court proceedings, Judge Abelson continued to poke holes in Kalshi's legal argument.
The biggest issue in Kalshi's case was perhaps one of congressional intent. The company had argued that when Congress amended the Commodity Exchange Act (CEA), it had effectively given jurisdiction over designated contract markets (DCM) to the CFTC and thus superseded state law.
Abelson's interpretation of not only the CEA but also the Wire Act and the Indian Gaming Regulatory Act says Kalshi is wrong, saying: "Kalshi has failed to show that Congress intended for the CEA to completely preclude any state’s gaming laws from being applied to DCMs."
Kalshi's First Legal Setback
A loss in court is new territory for Kalshi, which has been on a winning streak. The company initially won a challenge against the CFTC to list its political event contracts, and specifically its US presidential election event contracts in 2024.
From there, the company won injunctions against cease-and-desist letters from the Nevada Gaming Control Board and the New Jersey Division of Gaming Enforcement (DGE). Kalshi is still in court with Nevada and New Jersey.
The result in Maryland could easily spill over, specifically in New Jersey, where the pressure has been mounting for months. While Kalshi won an initial injunction, a flood of support is mounting for the DGE. Amicus briefs were filed by 34 state Attorneys General, over 40 tribes and tribal organizations, as well as anti-gambling groups like Stop Predatory Gambling.
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What Is Next For Kalshi In This Maryland Case?
The next step for Klashi is appeal. The expectation is that the company will appeal the decision as soon as possible to get an injunction over the MLGCC and continue selling its event contracts.
The company can't allow this decision to get out of control and into other states. Remember, Kalshi operates across the US, including states like California and Texas, where sports gambling is not legal.
An unfavorable ruling could push the company not only out of Maryland and its six million inhabitants, but also the more than 70 million in California and Texas.
