Kalshi suffered a damaging setback on Friday when a federal court in Maryland rejected its request for a preliminary injunction against the state’s enforcement of gambling laws against the prediction market platform.
US District Judge Adam B. Abelson denied Kalshi’s position, in what is a significant defeat for their aims to offer prediction markets nationwide under federal jurisdiction and oversight.
Kalshi is a CFTC-regulated platform that offers event or outcome-based ‘contracts’, typically on sports and political outcomes. The company had argued that the Commodity Exchange Act (CEA) pre-empts state gambling laws, granting exclusive regulatory authority to the CFTC.
Conversely, Maryland, like several other states, issued a cease-and-desist order, claiming Kalshi’s sports event contracts constitute illegal gambling under state law.
Judge Abelson has now ruled in their favor.
Specifically, he outlined that the financial exchange and prediction market (which recently secured a partnership with xAI) had not demonstrated its prospects for success in proving Congress intended the CEA to take precedence over state gambling laws, especially for sports-related markets.
Abelson stressed the importance of upholding the states’ authority on gambling, as ceding in Kalshi’s favor against Maryland would have wide-ranging consequences for state-level regulations across the entire United States, including federal arrangements such as the Wire Act and the Indian Gaming Regulatory Act.
Federal judges in different states have now issued conflicting rulings on whether states can use sports betting laws to regulate Kalshi and its sports-based event contracts, or whether states are preempted. This debate could wind up at U.S. Supreme Court: https://t.co/KgSQp7puN8.
— Michael McCann (@McCannSportsLaw) August 3, 2025
What happens next in the prediction market debate?
The judge continued to note inconsistencies with Kalshi’s legal position, as it had initially claimed sports betting did not carry economic importance in a separate election market legal wrangle. The company later changed its stance, arguing that the above comes under the remit of the CFTC.
As for what happens next, Kalshi has appealed Judge Abelson’s ruling to the Fourth Circuit, opening up the potential for a Supreme Court review. This would be a ruling on resolving conflicts of federal or state authority over prediction markets.
This case reflects the ongoing discord between state authorities and the prediction market platforms, but it appears to be an issue that is finally moving toward a conclusion.
The Maryland ruling doesn’t augur well for Kalshi, in contrast to its previous success in Nevada and New Jersey when federal judges did award injunctions, supporting the argument of CFTC authority.
As we move closer to a conclusion, the outcome is likely to set a defining precedent on the status of prediction markets across all of the United States.
Image credit: Kalshi
