Prediction market platform Kalshi has initiated a federal lawsuit against the Maryland Lottery and Gaming Control Commission (MLGCC), escalating an ongoing legal battle over whether its sports event contracts constitute unlawful sports wagering under state law. This marks the third time Kalshi has turned to the courts to dispute regulatory efforts aimed at halting its operations—following similar actions in Nevada and New Jersey.

Filed in a Maryland district court on Monday and first reported by lawyer Dan Wallach on X, Kalshi’s complaint asks for immediate relief in the form of a temporary restraining order and a preliminary injunction. The platform seeks to prevent Maryland authorities from enforcing a cease-and-desist directive issued on April 7, arguing that the state’s attempt to prohibit its services is at odds with federal law.

Maryland Claims Sports Betting Violation, Kalshi Pushes Back

Maryland regulators contend that Kalshi’s contracts, which allow users to trade on the outcomes of sporting events, effectively function as unlicensed sports betting. According to the MLGCC, these offerings violate Maryland’s gaming statutes, which restrict sports wagering to state-licensed operators. The agency placed Kalshi, Robinhood, and Crypto.com on notice with cease-and-desist letters asserting that their prediction markets resemble traditional gambling.

In response, Kalshi asserts that it operates within the boundaries of federal law. As a designated contract market (DCM), Kalshi is regulated by the Commodity Futures Trading Commission (CFTC) under the Commodity Exchange Act. The company argues that its event contracts—defined as financial instruments, not wagers—fall solely under federal jurisdiction and are preempted from state regulation.

Kalshi’s legal team emphasizes that Maryland’s actions encroach upon the exclusive regulatory domain of the CFTC. “This action challenges the State of Maryland’s intrusion into the federal government’s ‘exclusive’ authority to regulate futures derivatives trading on exchanges overseen by the Commodity Futures Trading Commission,” the lawsuit states.

Previous Victory in Nevada Bolsters Kalshi’s Argument

Kalshi’s position is reinforced by a recent court ruling in Nevada, where a federal judge sided with the platform and granted a preliminary injunction against a similar cease-and-desist order. The court ruled that Kalshi’s operations were protected under federal law and not subject to state gaming regulations, citing the risk of fragmented oversight and legal contradictions across jurisdictions.

The decision by Chief Judge Andrew P. Gordon found that Kalshi’s designation as a CFTC-regulated exchange precluded state interference. The ruling emphasized that “preventing the difficulties that would create is the reason Congress granted the CFTC exclusive jurisdiction over CFTC-designated exchanges.”

Kalshi has included the Nevada court’s decision as part of its Maryland filing, arguing that the same legal reasoning should apply.

Breakdown in Communication with Maryland Officials

Before taking legal action, Kalshi attempted to initiate dialogue with Maryland regulators to resolve the dispute informally. However, according to the lawsuit, those overtures were met with silence. Kalshi’s legal team contacted the MLGCC on April 18 to discuss the implications of the Nevada court ruling and request a delay in enforcement pending further discussions.

Despite multiple emails and calls from attorneys at Milbank and Orrick, Maryland officials declined to halt enforcement or enter into discussions before the April 22 deadline. In an email exchange, Michael Eaton of the MLGCA stated, “You have until April 22, 2025, to confirm whether you will comply with the cease and desist letter or if you intend to continue. Please note that we will take appropriate actions based on your response.”

Sports Contracts’ Legal Grey Area Spurs Broader Debate

Kalshi’s legal struggle comes at a time of increased scrutiny over event contracts that touch on the outcomes of sports events. While such contracts originally focused on weather and economic indicators, platforms have more recently expanded to include high-profile sports outcomes—from the Super Bowl to NBA games.

Although Kalshi self-certifies its markets under CFTC oversight, state regulators argue that contracts based on sports outcomes are indistinguishable from gambling. New Jersey’s Attorney General has challenged the CFTC’s authority in this space, arguing that the contracts fail to meet the definition of “swaps” and should not preempt state law.

In contrast, CFTC nominee Brian Quintenz, a current Kalshi board member, has publicly advocated for the economic legitimacy of sports contracts. He contends that such contracts impact financial markets, especially in light of regulated sports betting’s growing influence across the U.S.

The CFTC has yet to issue formal guidance on the matter but is scheduled to host a roundtable on April 30 to address the future of sports-related event contracts.

Industry-Wide Implications as Lawsuits Mount

With lawsuits now filed against gaming regulators in Nevada, New Jersey, and Maryland, Kalshi is positioning itself at the center of a pivotal legal and regulatory dispute. CEO Tarek Mansour has been vocal in defending Kalshi’s platform, asserting that prediction markets offer genuine public utility and should not be lumped together with traditional sports betting.

Kalshi’s argument highlights the broader tension between federal and state oversight in the rapidly evolving financial-tech space. Should the federal courts again side with Kalshi, it could set a precedent that reshapes the way prediction markets—and potentially even gambling—are regulated across the country.