Prediction market operator Kalshi has encountered its first major legal defeat, as a federal judge in Maryland declined to block state gambling laws from being enforced against the company.
In a ruling issued on Friday, August 1, U.S. District Court Judge Adam B. Abelson denied Kalshi’s motion for a preliminary injunction, a decision that stands in stark contrast to favorable judgments the company previously received in Nevada and New Jersey. Those earlier rulings had granted Kalshi temporary protection from state enforcement while legal proceedings continued. Maryland, however, refused to follow that precedent.
Kalshi had argued that the Commodity Exchange Act (CEA), which governs designated contract markets (DCMs) like its own, should preempt state gambling regulations. But Judge Abelson rejected that interpretation, concluding Kalshi “failed to show a likelihood of success” in establishing that federal law overrides Maryland’s authority.
“Kalshi’s burden with respect to its field preemption claim is to establish that Congress clearly and manifestly intended to strip states of their authority to regulate gambling if the company offering such wagering opportunities has been approved to sponsor a designated contracts market for commodities trading. Kalshi has not established that Congress had such clear and manifest purpose,” Abelson wrote.
Judge Cites Broader Legal Implications of Preemption Argument
The court expressed concerns that adopting Kalshi’s stance could undermine not only state-level gambling laws but also federal statutes such as the Wire Act and the Indian Gaming Regulatory Act. Abelson highlighted that the CEA explicitly requires designated contract markets to comply with all applicable laws, both state and federal—an acknowledgement that weakens Kalshi’s preemption claim.
Kalshi also argued that Maryland’s licensing rules conflicted with its federal obligations, but Abelson dismissed this as well. He concluded that the real issue was Kalshi’s unwillingness to comply with state rules, not any legal contradiction.
“It is Kalshi’s desire not to comply with Maryland law and presumably incur some additional compliance costs—not the existence of Maryland consumer protection laws themselves—that creates the situation Kalshi professes to worry about,” he noted in his opinion.
Legal Path Forward Uncertain, Appeal Expected
Kalshi, which categorizes its contracts as financial derivatives rather than gambling, quickly responded to the setback. A spokesperson said: “We are disappointed with the court’s decision and will move for an immediate stay of the ruling. We are on the right side of the law, and ultimately expect to prevail in this fight.”
Legal analysts expect the company to appeal the decision to the U.S. Court of Appeals for the Fourth Circuit. If Kalshi seeks a temporary stay, it could lead to a quicker ruling on whether Maryland may proceed with enforcement while the appeal unfolds. State regulators have not confirmed whether they intend to immediately resume enforcement, which had been paused during the court proceedings.
A Zoom status conference between both parties is scheduled for August 7 to outline the next steps in the case, which continues to be closely watched across the financial and legal sectors. With cease-and-desist orders already issued by at least seven states, Kalshi’s strategy to operate nationwide under federal oversight remains in question.
Source:
“Maryland Judge Rejects Kalshi’s Bid to Block State Gambling Laws; Denies Motion for Preliminary Injunction”, worldcasinodirectory.com, Aug 3, 2025
The post Maryland Ruling Deals Kalshi First Major Legal Blow first appeared on RealMoneyAction.com.