Kalshi Files Suit Against Maryland In Sports Betting Case
The prediction market platform asks a federal court to stop Maryland from enforcing a cease-and-desist, much like it did in Nevada and New Jersey.
Kalshi is going to court yet again.
The prediction market platform filed a lawsuit in a Maryland federal court on Monday night, asking a district court to stop enforcement of the state’s cease-and-desist order. Maryland regulators had told Kalshi they believe the company is offering sports betting illegally in the state.
The lawsuit was first reported by lawyer Dan Wallach.
The quick backstory
Maryland had sent C&Ds to Kalshi, Crypto.com and Robinhood on April 7. From a release at the time:
Maryland Lottery and Gaming informed the three companies that the sports event prediction markets they offer via their online platforms are indistinguishable from sports wagering because they are based on the outcomes of sporting events. The existence of these markets circumvents Maryland law (State Government Article §9–1E–01, et seq.), which defines sports wagering and permits it to be offered only by licensed operators.
Facing an April 22 deadline for an enforcement of the cease-and-desist, Kalshi decided to file suit, like it did in Nevada and New Jersey.
What’s in Kalshi’s lawsuit against Maryland
From the opening of the lawsuit:
This action challenges the State of Maryland's intrusion into the federal government's "exclusive" authority to regulate futures derivatives trading on exchanges overseen by the Commodity Futures Trading Commission ("CFTC"). 7 U.S.C. § 2(a){l ){A). Maryland agencies are seeking to prevent Plaintiff KalshiEX LLC ("Kalshi") from offering event contracts for trading on its federally regulated exchange. Maryland's attempt to regulate Kalshi intrudes upon the federal regulatory framework that Congress established for regulating futures derivatives on designated exchanges. Maryland law is both field-preempted and conflict- preempted. This Court should therefore issue both a preliminary and a permanent injunction, as well as declaratory relief to that effect.
Kalshi’s attorneys pointed to its early victory in a similar lawsuit in Nevada:
The U.S. District Court for the District of Nevada recently granted Kalshi a preliminary injunction in a substantially similar case. Like the Defendants here, state officials and state agencies in Nevada threatened Kalshi with civil and criminal liability for offering event contracts that were claimed to be contrary to Nevada law. Kalshi brought suit and sought a preliminary injunction, which the court granted. The court explained that "because Kalshi is a CFTC-designated DCM, it is subject to the CFTC's exclusive jurisdiction and state law is field preempted." KalshiEXLLC v. Hendrick, No. 2:25-cv-00575-APG, 2025 WL 1073495, at *6 (D. Nev. Apr. 9, 2025). And the court noted that Kalshi faced irreparable harm because it "faces a 'Robson's choice': if it does not comply with the defendants' demand to cease it faces civil and criminal liability, but if it does comply it will incur substantial economic and reputational harm as well as the potential existential threat of the CFTC taking action against it for violating the CFTC's Core Principles if Kalshi disrupts contracts or geographically limits who can enter contracts on what is supposed to be a national exchange."
The complaint spent some time laying out the economic utility of event contracts, but conspicuously does not use any examples of sports events contracts in this explanation. The main example relied and expanded upon and in the complaint is: “For example, a derivatives contract might center around whether an earthquake will take place in Los Angeles County before December 31, 2025.”
Like in past lawsuits, Kalshi again relays that the CFTC has not done anything to either affirm or stop sports event contracts:
The CFTC declined to restrict Kalshi's sports-event contracts. Unless and until the CFTC takes action on Kalshi's sports-event contracts, they remain authorized under federal law.
Kalshi is asking the court for a “preliminary and permanent injunction” prohibiting Maryland from taking enforcement actions related to sports betting under state law.
Kalshi is represented by Milbank here, with Neal Katyal listed as one of the attorneys. Katyal once served as Acting Solicitor General of the United States.
You can read the full complaint here:
Email exchanges between Kalshi and Maryland officials
Kalshi was told to cease-and-desist on April 7, and it appears the next contact between Kalshi and Maryland regulators was not attempted until Friday. From the complaint:
On April 18, 2025, Kalshi's counsel reached out to the MLGCC, offering to discuss the issues raised in the MLGCC's April 7 cease-and-desist letter and the implications of the Nevada court's ruling in the Hendrick matter. Neither the MLGCC, the MLGCA, nor any of their executives, commissioners, or staff responded to Kalshi's outreach.
Emails back and forth between Kalshi’s lawyers and Maryland officials on Monday was entered into evidence.
Andrew Cook, a partner at Orrick, wrote the following email on Monday afternoon to John Martin, the secretary of the Maryland Lottery and Gaming Control Commission and director of the Maryland Lottery and Gaming Control Agency, and Michael Eaton, the managing director for the MLGCA.
“We write in response to your letter ordering Kalshi to ‘immediately cease and desist’ offering sports-event contracts in Maryland. We had hoped to speak with you and your staff about this matter but are responding by email in accordance with your request that we respond in writing before meeting with us. The demand in your cease-and-desist letter implicates the very same issues being litigated in federal court in Nevada in a case where Kalshi recently successfully obtained a preliminary injunction enjoining enforcement of state law as preempted by laws duly enacted by the Congress of the United States. Out of respect for both Congress and the courts, and at this delicate time where these issues are at the forefront of public attention, we hope you will be willing to preserve the status quo and agree not to commence any enforcement action against Kalshi pending the outcome of the Nevada litigation, which will be directly relevant to the issues raised in your letter. At minimum, we would appreciate the opportunity to speak with you about this matter before you take any action to alter the status quo.
By way of background, Kalshi is a ‘designated contract market’ regulated by the Commodity Futures Trading Commission (CFTC). Accordingly, a federal statute called the Commodity Exchange Act provides that Kalshi's contracts are subject to the ‘exclusive jurisdiction’ of the CFTC. 7 U.S.C. § 2(a). The CFTC has authorized Kalshi's sports-event contracts under federal law. This means that state efforts to regulate or prohibit those same contracts are preempted under the Supremacy Clause of the U.S. Constitution. The U.S. District Court for the District of Nevada recently agreed with this conclusion in litigation brought by Kalshi involving a similar demand that Kalshi cease its event contracts in Nevada. The court concluded that the Commodity Exchange Act's ‘plain and unambiguous language’ preempts state efforts to regulate contracts "on exchanges that the CFTC has designated," including Kalshi. KalshiEx. LLC v. Hendrick, No. 2:25-CV-00575, 2025 WL 1073495, at *5 (D. Nev. Apr. 9, 2025). The court specifically referred to other states' similar efforts to regulate Kalshi's contracts, noted that they raise the prospect of a patchwork of inconsistent regulation, and explained that ‘[p]reventing the difficulties that would create is the reason Congress granted the CFTC exclusive jurisdiction over CFTC-designated exchanges.’ Id. at *7.
As the Nevada decision and the underlying federal law establish, Maryland lacks authority to regulate or prohibit Kalshi's event contracts. At the very least, the Nevada decision raises serious questions about Maryland's authority to order Kalshi to cease offering contracts the CFTC has approved. In a spirit of accommodation, we therefore hope you will agree to preserve the status quo and forbear any enforcement against Kalshi pending the outcome of the proceedings in Nevada. At minimum, we hope you will agree to preserve the status quo until we have an opportunity to speak with you. Given the cease-and-desist letter's deadline of tomorrow, please let us know as soon as you are able if you will agree to preserve the status quo pending further discussion with us regarding these matters. Your agreement to preserve the status quo would avoid any need to burden a Maryland court with emergency litigation involving the same issues now under review in Nevada.”
It’s at least somewhat interesting to note that Orrick’s governmental affairs practice is responsible for the introduction and passage of many of the sports betting laws across the country.
Eaton replied briefly: “We have received your response. We'll review internally and get back to you.”
Gurbir Grewal, a partner at Milbank and counsel for Kalshi, replied to Eaton about 20 minutes later:
Mr. Eaton, thank you for your prompt response. We just called you but were unable to connect. We would appreciate an opportunity to speak with you before 3 p.m. today given tomorrow's compliance deadline. Getting your assurance about maintaining the status quo would avoid the need to seek emergency relief, which we hope to avoid both for the sake of the parties and the court. You can reach me at the below number or at my cell at [redacted].
Eaton replied:
I'm following up on the message you left regarding our cease and desist request. As outlined in our previous correspondence, you have until April 22, 2025, to confirm whether you will comply with the cease and desist letter or if you intend to continue. Please note that we will take appropriate actions based on your response.
That’s the end of the email chain entered into evidence.