Maryland has filed its case against prediction market operator Kalshi. The Old Line State is trying a new approach in this fight, focusing on section 40.11 of the Commodities Exchange Act, which prohibits event contracts such as sports betting.
Nevada and New Jersey have already tangled with Kalshi and lost, with both courts abdicating judgment to the Commodity Futures Trading Commission (CFTC).
The fight between Kalshi and Maryland began when the state sent Kalshi, Robinhood, and Crypto.com a cease-and-desist letter asking the companies to stop providing sports event contracts. Kalshi responded by suing the state.
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How Is Maryland's Approach Novel?
In Nevada and New Jersey, both cases ended with the courts letting the CFTC decide what to do with this dispute. In Maryland's defense filing, they've sought to prove how the CFTC has already provided a ruling in the past prohibiting these types of event contracts.
Maryland: "Kalshi and the District Courts of New Jersey and Nevada ignore the blanket prohibition in Regulation 40.11(a)(1) and instead focus only on the existence of the Special Rule authorizing the CFTC’s review." pic.twitter.com/MzOS0XcUqf
— Daniel Wallach (@WALLACHLEGAL) May 10, 2025
Nevada and New Jersey instead offered a basic argument that Kalshi offered unlicensed sports gambling, which was not legal within their borders. Both courts believed they did not have jurisdiction to bar a federally regulated entity and deferred to the CFTC.
Based on those rulings, Maryland decided to paint the court into a corner in its defense filing. With its argument that the CFTC has already barred these even contracts, the court must provide a ruling rather than deflect the responsibility onto a federal regulator that has been silent on prediction markets.
Appeal Filed In New Jersey
Meanwhile, New Jersey has appealed the decisions to grant Kalshi an injunction with the US's third circuit court of appeals, arguing that the CFTC was not created to enforce sports betting; that's what the Professional and Amateur Sports Protection Act (PASPA) was for.
“There are other provisions in federal law, outside of PASPA, that further demonstrate the federal policy of disfavoring sports-gambling. Indeed, in enacting PASPA, Congress explicitly noted that the law was ‘complementary to and consistent with current Federal law’ with respect to sports wagering."
A decision in this case is expected to take a year, unless either party files for an expedited ruling. An unlikely outcome. With the injunction in place, Kalshi can continue operating freely, while New Jersey will certainly hope to wait for developments in the Maryland case before considering expediting this case.
Once the Third Circuit Court eventually reaches a decision, it will have a massive impact on New Jersey and beyond. The Third Circuit Court has appellate jurisdiction in New Jersey, Pennsylvania, Delaware, and the US Virgin Islands.
