Kalshi Files Lawsuit Against Maryland Lottery After C&D Order

The New York-based prediction market platform Kalshi has filed a lawsuit in Maryland federal court against the MD Lottery following the prior issuance of a cease-and-desist order to the company. 

The news was first reported by Daniel Wallach, a betting legal expert who posted on X (formerly Twitter) this morning.

Kalshi sees the MD Lottery’s threat as unconstitutional and violating federal law. In its lawsuit, the platform asked the Maryland federal court for an immediate TRO and to schedule an injunction hearing, as the sports betting and gaming lawyer reports.

In the document, Kalshi argues that the Maryland Lottery and Gaming Control Commission’s (MLGCC) actions could cause “irreparable harm” to Kalshi’s business. 

Unless these actions are prevented, Kalshi argues, it could lead to a state-by-state patchwork of regulations that Congress wanted to avoid when it subjected CFTC-regulated exchanges to exclusive federal regulations.

Kalshi Pushes Back Against Maryland

The predictions market platform argued a similar point earlier this month when it scored a partial win in a legal battle with Nevada. Kalshi claims that, as it is federally regulated, it is not required to follow state-by-state gambling regulations or taxation laws.

Furthermore, the platform heavily leans on the Nevada preliminary injunction order, emphasizing that a federal judge has already ruled in its favor and permitted it to continue offering sports event contracts in Nevada for now. 

It argues that these are the same event contracts that Maryland targeted in its cease-and-desist letter.

Kalshi reaffirmed that a CFTC-designated contract market offers event contracts on its exchange. As such, “it is subject to the CFTC’s exclusive jurisdiction, and state law is field preempted.” 

Kalshi Will Only Follow the Instructions Of The CFTC

While Nevada was the first to challenge Kalshi’s right to offer its sports-event contracts, Maryland was one of a flurry of states to send similar cease-and-desist orders. 

The Tennessee regulator recently wrote to the CFTC, strongly opposing sports event prediction markets within its jurisdiction. On 14 April, the state regulator sent a letter to the Commission asking the federal regulator to respect the state law, referring to the policy decision made by the Tennessee Legislature, and not permit the offering of sports-event contracts.

Kalshi continues to argue that its contested product offerings are financial derivatives in the eyes of the CFTC. Its CEO, Tarek Mansour, told TechCrunch that the CFTC is the platform’s regulator and that Kalshi will stop if the commodities regulator orders it to do so.

However, if this does not happen, Kalshi believes it is within its rights to continue offering its services despite the state regulators’ objections.