The Maryland District Court has denied Kalshi’s request for a temporary injunction, marking a significant legal setback for the exchange’s sports event contracts at the court level.
Kalshi sought to maintain the availability of these contracts across all 50 US states for individuals aged 18 and over. The lawsuit and injunction request followed a cease-and-desist order from the Maryland Lottery and Gaming Control Commission (MLGCC) in April.
However, Judge Adam B. Abelson, on Friday, August 1, ruled against Kalshi’s request for an injunction, stating that the New York-based exchange had “failed to show a likelihood of success” in its lawsuit against the Maryland regulator.
This decision contrasts with Kalshi’s previous legal victories in Nevada and New Jersey, where courts sided with the exchange despite the reservations expressed by state gaming regulators.
Despite opposition from several state-level regulators, Kalshi argues that its contracts, which are based on trading predictions of sports fixtures outcomes, do not constitute sports betting.
Since launching the contracts earlier this year, Kalshi has received cease-and-desist orders from over 12 states, which argue that sports event contracts represent unauthorized sports betting.
In Nevada and New Jersey, judges upheld Kalshi’s stance that its products are federally regulated by the Commodity Futures Trading Commission (CFTC), thus, reportedly exempting them from state-level laws.
Nonetheless, the Maryland District Court dismissed Kalshi’s claim of being unaffected by state regulation, highlighting the company’s challenges in proving that it could override state laws under federal regulation by the CFTC.
Judge Abelson emphasized that the issue does not solely depend on federal regulation but whether the state law governs conduct historically governed by state regulation.
Judge Abelson also pointed out the substantial historical evidence that gaming and sports gambling have traditionally been regulated by the states. He noted that Kalshi has not sufficiently challenged this precedent.
“Kalshi’s burden with respect to 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 has been approved to sponsor a designated contracts market for commodities trading,” Abelson stated. “Kalshi has not established that Congress had such a clear and manifest purpose.”
As a regulated entity by the CFTC under the Commodity Exchange Act (CEA), Kalshi contends that adhering to the MLGCC’s rules would lead to a breach of the CEA. However, Abelson explained that obtaining a sports betting license would alleviate this conflict.
He concluded, “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. As long as Kalshi obtains a license and complies with Maryland sports gambling laws, those laws would not pose an obstacle to making the sports gambling portion of its platform available to users in Maryland.”
Kalshi has the option to appeal the injunction denial and plans to continue offering its contracts in Maryland in the meantime.
With the MLGCC initially agreeing not to enforce its cease-and-desist order until a decision was reached, further action remains uncertain.
Both parties are scheduled to meet on August 7 for a status conference.
Despite similar legal victories in New Jersey and Nevada, Kalshi’s initial plea for a preliminary injunction to continue operations in Maryland has been dismissed.