Kalshi made its latest move in an ongoing court case against Maryland state gaming regulators. The prediction markets company filed a brief on Monday in reply to Maryland’s opposition to Kalshi’s request for a temporary restraining order and preliminary injunction.
Maryland is one of three states Kalshi has sued in defense of its right to offer sports event contracts in all 50 states.
Kalshi vs. Maryland case timeline
So far, only a few major developments have taken place in Kalshi’s case against Maryland’s gaming regulators. Here’s the timeline so far:
- April 7 – The Maryland Lottery and Gaming Control Commission sends Kalshi a cease-and-desist letter.
- April 21 – Kalshi files suit against Maryland, requesting a temporary restraining order.
- May 9 – Kalshi amends filing to request both a temporary restraining order and a preliminary injunction like in the other state cases.
- May 12 – Maryland files opposition to Kalshi’s request.
- May 19 – Kalshi files its reply to Maryland’s opposition.
Kalshi amended its initial filing to ask the judge for both a temporary restraining order and a preliminary injunction. As in its similar cases against New Jersey and Nevada regulators, Kalshi filed those requests so it could continue offering its event contracts in Maryland without fear of facing fines or penalties that could result if the state were to enforce its cease-and-desist letter.
Maryland and Kalshi disagree on federal preemption
One of the newest arguments in Maryland’s briefs concerns the preemption of state law. To decide how Congress intended to regulate an industry, some legal theories have used the presumption against preemption. Under that theory, unless Congress clearly intended to override state law, federal law should not be assumed to preempt state law.
Maryland has argued that the presumption against preemption should be applied in its case against Kalshi. However, Kalshi’s May 19 reply brief maintains that the language of the Commodity Exchange Act (CEA) and its legislative history supports intended federal oversight of Designated Contract Markets (DCMs) like Kalshi’s:
“…the presumption does not apply to the field of regulating derivatives markets—’an area where there has been a history of significant federal presence.’…The presumption is particularly inapposite given that the CEA does not preempt state gambling laws in all applications, but merely as applied to the narrow field of trading on DCMs, which has always been the subject of federal rather than state authority. Even if the presumption applied, it is ‘overcome’ where ‘the text and structure’ of the relevant federal statute ‘unambiguously apportion…control’ over the field to the federal agency.”
It will be up to the courts to decide whether federal preemption will bring lasting relief to Kalshi instead of temporary relief preserving the status quo as court cases continue playing out.
Tension over sports contracts continues
An event contract can be on anything, but there are certain categories that the CFTC must watch more closely than others. The Dodd-Frank Act listed several categories of event contracts that the CFTC could review to see whether they were in the public interest to allow. Among those categories are terrorism, assassination, illegal events under state or federal law, and gaming.
State gambling regulators have argued that event contracts on sports are functionally identical to sports wagers, so state gaming law should be able to prohibit them. Kalshi has countered that only the CFTC can decide whether to allow sports contracts because federal regulations preempt state law.
The federal preemption argument has delivered Kalshi preliminary injunctions in Nevada and New Jersey. Even if Kalshi’s other legal arguments are weaker or incomplete, federal preemption could deliver substantive legal victories once these cases begin to be resolved.
