Kalshi, a federally regulated prediction market platform, has encountered a legal setback in Maryland. A judge from the Maryland District Court has denied its request for an injunction against a cease-and-desist order issued by the Maryland Lottery and Gaming agency, which blocks Kalshi’s sports-related event contracts in the state. Unlike courts in New Jersey and Nevada, which granted preliminary injunctions, the Maryland District Court adopted a more detailed approach. Judge Adam B. Abelson issued the ruling more than three months after Kalshi filed its lawsuit.
The Maryland lawsuit
Kalshi asked the court to block Maryland’s cease-and-desist order, arguing that only the Commodity Futures Trading Commission (CFTC) had the authority to determine the legality of its contracts. The court rejected the request.
Maryland stated that Kalshi’s contracts were equivalent to sports betting, which falls under state regulation. The state claimed Kalshi was offering gambling products without a licence. Kalshi acknowledged that its sports contracts resembled betting but argued that state law did not apply. It maintained that the Commodity Exchange Act (CEA) granted the CFTC exclusive authority to regulate such contracts, thereby superseding state gambling laws.
Federal vs. State authority
The Commodity Exchange Act (CEA) is a federal law that regulates the trading of futures and commodities. It grants the Commodity Futures Trading Commission (CFTC) authority over event contracts, such as those offered by Kalshi. Kalshi argued that Congress intended to fully regulate event contracts under federal law, thereby preventing states from enforcing their own rules in this area.
In this case, Judge Abelson applied a “presumption against pre-emption”, noting that states traditionally regulate gambling. The judge also found the CEA unclear on whether it overrides state gambling laws. The court relied on legal context and concluded that Congress did not intend to eliminate state authority in this area.
The judge observed, “The question of whether the presumption ‘particularly’ applies here turns not on whether the federal statute can be framed as about an area of existing federal regulation, but rather whether the state law governs conduct that has historically been subject to state regulation.”
The judge further stated, “Kalshi’s burden concerning its field pre-emption claim is to establish that Congress clearly and manifestly intended to strip states of their authority to regulate gambling if the company offering such wagering opportunities has been approved to sponsor a designated contracts market for commodities trading. Kalshi has not established that Congress had such a clear and manifest purpose.”
IGRA complication and judge ruling
A group of 27 tribes submitted a legal brief supporting Maryland’s position, arguing that Kalshi’s model was inconsistent with the Indian Gaming Regulatory Act (IGRA) and could set a problematic precedent. The court acknowledged the argument but did not issue a ruling on it.
Kalshi needed to show a strong chance of winning the case to obtain an injunction. The court found it did not meet that standard. Judge Abelson noted that while the Commodity Exchange Act (CEA) gives the CFTC regulatory authority, it also allows the Commission to consider state laws when evaluating specific contracts. This weakened Kalshi’s argument.
Kalshi argued that following state laws would prevent it from operating effectively. The court disagreed. Judge Abelson stated that Kalshi could apply for a state gambling licence, like other companies offering sports-related products. If Kalshi wanted to operate in Maryland, it needed to comply with state regulations.
The judge noted, “It is Kalshi’s desire not to comply with Maryland law and presumably incur some additional compliance costs—not the existence of Maryland consumer protection laws themselves—that creates the situation Kalshi professes to worry about. So long as Kalshi obtains a licence and complies with Maryland sports gambling laws, those laws would not pose an obstacle to Kalshi making the sports gambling portion of its platform available to users in Maryland.”
Kalshi’s plan to appeal
Kalshi intends to appeal to the U.S. Court of Appeals for the Fourth Circuit, arguing that the judge misinterpreted the Commodity Exchange Act (CEA) and did not properly consider federal regulatory protections. A status conference is scheduled for 7 August 2025 via Zoom to determine the following procedural steps, which may include motions for a stay or an expedited appeal. The hearing will clarify how the case will proceed and whether Kalshi can continue operations in Maryland during the appeal process.
