The state of Maryland has called the court’s attention to a recent court ruling that could work in favor of states’ arguments against federal preemption in the regulation of Kalshi’s sports event contracts.
The Notice of Supplemental Authority filed on Thursday, July 17 cites GenBioPro Inc. v. Raynes, a case in the Fourth Circuit in which a ruling was just issued on July 15.
GenBioPro Inc. manufactures mifepristone, which is used for terminating early pregnancies. The company sued West Virginia, arguing that the state’s near-total abortion ban conflicted with the Food and Drug Administration’s approval of mifepristone. The split panel of judges ruled that:
“‘[b]ecause the [Food and Drug Administration Amendments Act] falls well short of expressing a clear intention to displace the states’ historic and sovereign right to protect the health and safety of their citizens,’ it did not preempt West Virginia state law.”
Because the state has historically been in charge of its citizens’ health, and the relevant federal law didn’t intend to preempt it, West Virginia’s state law should be upheld.
Maryland hopes that reasoning will apply to state sports betting law and lead the judge to rule in favor of the state having the right to prohibit Kalshi’s event contracts on sports.
July 18 Update: Kalshi responds
Kalshi filed a response to Maryland’s notice of supplemental authority, arguing how the Fourth Circuit ruling fundamentally differs from the federal preemption scenario at play regarding the jurisdiction over derivatives markets, including sports-related ones. In its response, Kalshi lawyers stated:
“Here, in sharp contrast, the text of the Commodity Exchange Act grants ‘exclusive jurisdiction’ to regulate trading on federally regulated derivatives markets…exactly the sort of textual evidence of preemption missing in GenBioPro.”
Emerging states’ rights case
If the Maryland judge rules against Kalshi, it could set up a states’ rights case in the Supreme Court.
The states that have sent Kalshi, Crypto.com, and Robinhood cease and desist letters have argued that sports betting regulation is a task that has traditionally fallen to states instead of the federal government.
Kalshi continues to argue that only the CFTC and Congress have the authority to limit what it offers event contracts on. Attorney Philip Reale pointed out on LinkedIn that:
“The 4th Circuit found there was no express intent in the FDA rules to preempt states’ right to regulate matters of health and safety. Similarly, the CFTC regulations certainly do not express a clear and manifest intent to preempt a state’s sovereign authority to regulate gaming, which was expressly granted in Murphy v. NCAA (2018). In short, the 4th Circuit clearly upheld the long-standing precedent that Congress does not abrogate state sovereign immunity unless it clearly articulates an intent to do so. This rings especially true in areas of traditional state regulation – such as gaming.”
If this case goes to the Supreme Court, the states could argue that gaming regulation is under their jurisdiction thanks to the 10th Amendment.
Maryland’s high stakes for all parties
Unlike Nevada and New Jersey, where Kalshi won preliminary injunctions, Maryland ordered supplemental briefing. States, casino industry organizations, and the Indian Gaming Association, among others, filed amicus briefs explaining why Kalshi’s contracts constitute gaming and that Congress didn’t intend for the CFTC to regulate sports contracts.
Sports betting lawyer Daniel Wallach noted that Maryland is in the best position to deliver state gaming regulators a win:
Based on the oral argument alone, Maryland seemed like the strong favorite to end Kalshi’s winning streak in court. Bolstered by the CA4 decision and strong supplemental briefing from the AG’s Office (10/10) + the tribal amici brief which hit all the right notes. https://t.co/AboSphvpck
— Daniel Wallach (@WALLACHLEGAL) July 17, 2025
If Kalshi overcomes strong opposition to keep its sports contracts live, it will be a decisive victory that will set crucial precedent for the Third Circuit to consider. A Kalshi victory could also invite additional states to enforce their own bans on sports contracts.
The stakes are high for both sides in Maryland’s case, and this development throws another curve ball into the case.
