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A federal judge has denied Kalshi’s request for a preliminary injunction against Maryland’s state gaming regulator, marking a significant legal setback for the prediction market platform in its ongoing battle with state authorities over the legality of its operations. U.S. District Judge John A. Martin ruled that Kalshi is operating unlawfully in Maryland, siding with the Maryland Lottery and Gaming Commission (MLGC), which issued a cease-and-desist order to the company in April. The core dispute involves Kalshi’s offering of contracts tied to sports outcomes—products the MLGC argues constitute unregulated sports betting.

 

Key Points

• Federal Judge John A. Martin denies Kalshi’s request for a preliminary injunction in Maryland.

• Maryland regulator classifies Kalshi’s sports prediction markets as unregulated sports betting.

• Ruling contrasts with favorable injunctions Kalshi received in New Jersey and Nevada.

 

Kalshi maintains that its operations fall under federal commodities regulations, not state gambling law. However, Judge Martin rejected this position, grounding his ruling in a “presumption against preemption” argument. He emphasized that Maryland, like other states, has a longstanding interest in regulating both gambling and prediction markets.

This judicial interpretation diverges from recent rulings in New Jersey and Nevada, where federal judges granted Kalshi preliminary injunctions following similar cease-and-desist actions from those states’ regulators. In total, Kalshi has received enforcement notices from regulators in seven states, contesting actions in three: Maryland, New Jersey, and Nevada.

Martin’s decision underscores a widening legal divide among jurisdictions over how to treat prediction markets, particularly those based on sporting events. While Kalshi argues these markets are a form of financial derivative subject to federal oversight by the Commodity Futures Trading Commission (CFTC), Maryland’s legal position frames them as a form of sports betting requiring state regulation. Kalshi’s legal position may face further headwinds. In June, the company also filed opposition to tribal litigation in Maryland, signaling that it faces multiple layers of regulatory and legal scrutiny in the state.

 

Maryland’s interest in regulating both prediction markets and sports betting is historically significant and must be upheld against claims of federal preemption.

 

Conclusion & Outlook

Despite the loss, Kalshi is expected to appeal the Maryland ruling. But the broader legal landscape remains murky. The CFTC—tasked with overseeing derivatives markets—has yet to offer clear, public guidance on the status of event-based contracts tied to sports outcomes. In May, the agency reportedly sought court permission to settle with Kalshi in a separate matter. Adding to the complexity, Brian Quintenz, recently nominated by former President Donald Trump to lead the CFTC, previously served on Kalshi’s board.

Until further federal guidance emerges, the tension between state and federal jurisdiction over prediction markets is likely to persist. For Kalshi, the legal uncertainty poses both a regulatory risk and a strategic challenge in scaling its platform nationwide.