Prediction market operator Kalshi has suffered a major defeat in Maryland, where a federal judge denied its request to block the state from enforcing its gambling laws. The ruling halts Kalshi’s momentum after earlier victories in Nevada and New Jersey and opens up a wider legal clash over whether state or federal law governs its operations.
On August 1, U.S. District Judge Adam B. Abelson ruled against Kalshi’s motion for a preliminary injunction. The company argued that its federally approved platform, which allows users to trade on events like political outcomes and sports results, is protected under the Commodity Exchange Act (CEA) and thus exempt from Maryland’s licensing requirements. Abelson disagreed, ruling that Kalshi hadn’t demonstrated a likely chance of success in arguing that federal law overrides the state’s authority.
States Retain Gambling Oversight, Judge Rules
In his opinion, Judge Abelson emphasized the longstanding authority of states to regulate gambling within their borders. He found no evidence that Congress intended the CEA to wipe out that power simply because a platform like Kalshi is registered with the Commodity Futures Trading Commission (CFTC).
“Kalshi has not established that Congress had such clear and manifest purpose,” Abelson wrote, pointing to the CEA’s own requirement that designated contract markets (DCMs) comply with both state and federal laws.
He also raised broader concerns, warning that Kalshi’s interpretation could disrupt the balance of state and federal gambling oversight and undercut other laws such as the Wire Act and the Indian Gaming Regulatory Act (IGRA).
Maryland Ruling Contrasts with Prior Wins for Kalshi
Kalshi previously secured preliminary injunctions in Nevada and New Jersey, where courts sided with the company’s claim that CFTC approval provided legal cover to operate without state gambling licenses. Maryland’s ruling breaks from that trend, suggesting a growing rift among federal courts.
Judges in those earlier cases leaned on the CEA’s broad language and the CFTC’s role in overseeing derivatives markets. Judge Abelson, by contrast, took a more cautious view, noting that Congress had explicitly left room for states to address public interest concerns around event-based contracts.
No Conflict Found Between Federal Rules and Maryland Licensing
Kalshi also claimed that complying with Maryland’s licensing rules would clash with its federal obligations. Abelson rejected that argument as well, stating that Kalshi’s issue wasn’t legal incompatibility, but its unwillingness to go through Maryland’s regulatory process.
“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,” he wrote.
Immediate Appeal Filed, Supreme Court May Get Involved
Kalshi quickly filed an appeal with the U.S. Court of Appeals for the Fourth Circuit and is expected to request a stay of the ruling. Legal observers believe the dispute could eventually land before the U.S. Supreme Court, especially as federal courts split on the question of whether prediction markets count as sports betting.
While the core of Kalshi’s argument centers on whether its contracts are gambling or regulated financial products, the broader issue is the interpretation of the Supremacy Clause and how far federal law can go in preempting state regulations.
Tribal Groups, Gaming Associations Join the Fight
The Maryland ruling also acknowledged opposition from tribal nations and gaming associations. These groups warned that if Kalshi were exempt from state oversight, the entire regulatory structure—including tribal gaming under IGRA—could be threatened.
Abelson echoed those concerns, stating that accepting Kalshi’s view could mean the CEA implicitly overrides IGRA, a move with major implications for tribal sovereignty and gaming revenue.
Industry Shifts Amid Legal Uncertainty
Kalshi’s legal troubles are mounting. Seven states have issued cease-and-desist orders, and its board member Brian Quintenz’s nomination to lead the CFTC was recently paused. Meanwhile, rival Polymarket is positioning itself for a U.S. comeback after acquiring a CFTC-regulated exchange, potentially cutting into Kalshi’s market share regardless of courtroom results.
With a Zoom conference scheduled for August 7 to chart the next steps, the case is shaping up to be a key test of whether prediction markets can operate nationally under a single federal framework—or must navigate a patchwork of state gambling laws.
