Maryland Judge Rejects Preliminary Injunction Request by Kalshi
In a recent development, US District Judge Adam Abelson of Maryland denied Kalshi's request for a preliminary injunction against the state's sports betting regulators. This ruling comes after the Maryland Lottery and Gaming Commission (MLGC) issued a cease-and-desist letter to Kalshi, claiming that the company's offering of prediction contracts tied to sports outcomes constitutes unregulated sports betting.
Maryland's Stance on Kalshi's Sports Platform
The MLGC's position is based on the belief that Kalshi's sports platform falls under the category of sports wagering, which requires specific licensing, commission approval of wagers, and authorization under Maryland law. However, Kalshi maintains that its sports platform does not constitute sports betting.
Legal Challenges and Appeals
In response to the cease-and-desist letters, Kalshi has filed lawsuits against state regulators. The company argues that the Commodity Exchange Act (CEA) preempts Maryland's gaming laws, but the court found that Maryland has a strong interest and authority in regulating such activities.
The court's ruling creates a circuit split with earlier decisions in New Jersey and Nevada, where courts granted Kalshi injunctions to continue operating pending litigation. This conflicting federal jurisprudence signals ongoing legal uncertainty for prediction markets offering sports-based contracts.
Implications for US Prediction Markets
The decision upholds the authority of states to regulate or restrict prediction markets that resemble traditional sports betting. This suggests that prediction markets cannot rely solely on the CEA or Commodity Futures Trading Commission (CFTC) jurisdiction to avoid state gambling laws.
The ultimate outcome could significantly influence the future regulatory landscape and operational freedom for prediction market platforms nationwide. In the near term, operators like Kalshi may face increased state-level legal challenges and licensing requirements if their offerings are viewed as akin to sports wagering.
Ongoing Legal Battle
Kalshi is expected to appeal the ruling, and the issue might escalate to the U.S. Supreme Court to resolve the disagreement between federal circuits. The ruling in Maryland introduces fresh uncertainty about the legality and long-term viability of US prediction markets.
Friday's decision in Maryland marks a setback for Kalshi as the court denied its request for a preliminary injunction. However, the company is expected to maintain operations in Maryland while continuing legal challenges and preparing potential appeals.
Merland's Tribal Challenges
In Merland, tribes have also challenged Kalshi's sports betting contracts, claiming they violate tribal gaming laws. The implications of these challenges remain to be seen.
In summary, the Maryland court's ruling prioritizes state regulatory authority over Kalshi’s federal preemption claim, highlighting ongoing legal fragmentation that casts uncertainty on the legality and sustainability of US sports-focused prediction markets.
The Maryland Lottery and Gaming Commission (MLGC) has taken a stance against Kalshi's sports platform, considering it a form of unregulated sports betting, as it falls under the category of sports wagering. In legal challenges and appeals, Kalshi argues that its sports-betting platform is not subject to Maryland's gaming laws due to the Commodity Exchange Act (CEA) preemption. However, the court found that Maryland has the authority to regulate such activities.
