A federal court in Maryland has rejected Kalshi’s request for a preliminary injunction, marking the company’s first major legal defeat in its broader strategy to operate prediction markets nationwide under federal oversight.

U.S. District Court Judge Adam B. Abelson issued the ruling on Friday, August 1, declining to halt Maryland’s enforcement of state gambling laws against Kalshi. The company, which operates a designated contract market (DCM) for event-based contracts such as sports and politics, had claimed that the Commodity Exchange Act (CEA) preempts Maryland’s regulatory authority. Abelson disagreed, ruling that Kalshi had not demonstrated a strong chance of success in proving that federal law invalidates state gambling regulations.

Maryland Court Breaks Kalshi’s Legal Momentum

The decision stands in contrast to earlier court victories for Kalshi in Nevada and New Jersey, where judges granted preliminary injunctions that allowed the platform to continue operating while legal challenges were pending. Maryland, however, declined to follow suit.

Judge Abelson emphasized the traditional authority states hold over gambling, noting that Kalshi failed to show clear congressional intent to override this authority through the CEA. He stated: “Kalshi’s burden with respect to its field preemption 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 clear and manifest purpose.”

Abelson also raised concerns that accepting Kalshi’s preemption argument could extend beyond Maryland and potentially disrupt the entire system of state-level gaming laws, including federal statutes like the Wire Act and the Indian Gaming Regulatory Act (IGRA).

In his opinion, Abelson pointed out that the acknowledgment in the CEA that DCMs must not violate state or federal law contradicts any suggestion of comprehensive federal preemption. He concluded that the federal framework lacks the clarity necessary to displace Maryland’s gambling laws.

Judge Dismisses Claims of Conflict Between State and Federal Law

Kalshi had also contended that Maryland’s licensing requirements were in conflict with its operations under the CEA. However, Abelson saw no indication that acquiring a Maryland sports betting license would interfere with the company’s federal regulatory obligations.

“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,” Abelson wrote.

This reasoning further reinforced the court’s decision to deny the preliminary injunction, concluding that Kalshi’s claim did not meet the legal threshold for injunctive relief.

Kalshi, which maintains its contracts are not gambling but financial derivatives, quickly expressed dissatisfaction with the outcome. A spokesperson said: “We are disappointed with the court’s decision and will move for an immediate stay of the ruling. We are on the right side of the law, and ultimately expect to prevail in this fight.”

Legal experts anticipate Kalshi will soon file an appeal with the U.S. Court of Appeals for the Fourth Circuit. If the appellate court is asked to issue a temporary stay, it could fast-track a ruling on whether Maryland can enforce its cease-and-desist order while the appeal is underway. Maryland regulators have not yet confirmed if they intend to resume enforcement, which had been paused during litigation.

As The Event Horizon reports, a Zoom status conference between parties is scheduled for August 7 to determine next steps. Meanwhile, the case remains a significant marker in the broader national debate over the legal status of prediction markets, particularly those resembling sports betting.

Kalshi is facing increasing scrutiny, with cease-and-desist orders issued by seven states. Despite court victories in Nevada and New Jersey, this ruling raises doubts about how other jurisdictions may view Kalshi’s assertion that federal law gives it the green light to operate without complying with state gambling regulations.

As these legal battles unfold, some analysts believe the ultimate resolution could come from the U.S. Supreme Court. If so, the case may become a defining moment for the future of prediction markets and their regulatory classification in the United States.