Kalshi Appeals Maryland Ruling Over Prediction Market Dispute

Kalshi is taking its legal fight to the next level. The prediction market operator has filed an appeal with the US Court of Appeals after a Maryland district court denied its request to block state regulators from enforcing a cease-and-desist order.

Good to Know

• Kalshi is a federally regulated exchange licensed by the Commodity Futures Trading Commission (CFTC).
• The Maryland Lottery and Gaming Control Commission (MLGCC) accused Kalshi of offering unlicensed gambling.
• The latest appeal aims to clarify whether federal commodities law preempts state-level gambling restrictions.

At the heart of the dispute lies a question that could shape how prediction markets operate nationwide—whether federal oversight under the Commodity Exchange Act (CEA) overrides state gambling laws.

Federal Oversight vs State Power

Kalshi argues that because it is licensed and supervised by the CFTC, its operations fall solely under federal law. The company offers contracts where users can predict future events for potential payouts—contracts that the CFTC categorizes as federally regulated derivatives, not gambling products.

The Maryland regulator disagrees. Earlier this year, the MLGCC issued a cease-and-desist order claiming Kalshi’s activities violated state gambling laws. In response, Kalshi sought a temporary restraining order in April to stop Maryland from taking enforcement action. That request was rejected in August, prompting the exchange to file its latest appeal.

Kalshi now seeks to overturn the Maryland court’s decision, arguing that allowing individual states to classify federally approved prediction markets as gambling would erode federal authority. As the company stated, federal law “bars Maryland from regulating Kalshi’s contracts under straightforward principles of both field and conflict preemption.”

The Legal Argument

Kalshi’s filing claims the Maryland court misinterpreted Congress’s intent when it suggested a “gambling” exception within the Commodity Exchange Act. According to Kalshi, no such exception exists—and permitting state regulators to apply their own gambling rules would “nullify the CFTC’s authority” to oversee such markets.

The appeal lays out several legal points:

1. The Commodity Exchange Act preempts Maryland gambling law as applied to Kalshi.
2. Maryland’s laws are “field preempted,” meaning the federal framework already covers the area.
3. Compliance with Maryland law would conflict with CEA objectives, creating an “impossible” legal position for the company.

In the closing statement, Kalshi’s lawyers wrote, “This Court should reverse the district court’s denial of preliminary injunctive relief.”