Maryland has become the latest and possibly sixth state to has taken legal action against Kalshi, the popular prediction market platform that has overturned consumer expectations about politics and sports. Other states have moved against the operator and more similar platforms, including in places such as New Jersey, Nevada, Illinois, Ohio, and Montana.
Kalshi under more pressure as more states question its legitimacy
Although not officially a gambling company, and subject to regulatory oversight by the US Commodity Futures Trade Commission (CFTC), Kalshi has been able to garner significant interest from traditional sports fans who have been turning up to place a prediction on its platform in droves, and potentially dipping revenue for traditional sportsbooks in the United States in the process.
This is loosely the argument that the Maryland Lottery and Gaming Control Commission (MLGCC), the state gambling regulator, is making in acting against the platform. The company sent a cease-and-desist letter to Kalshi, along with Robinhood and Crypto.com on Monday, April 7, accusing the companies of offering "what is in fact wagering on sports events."
The regulator pointed out that none of the three companies targeted in this move actually had an official license to provide this type of product. For their part, the platforms have denied that prediction markets are equitable to sports betting in any form.
The key contention arises from whether "making a prediction" would be interpreted to be the same as "placing a wager" from a legal standpoint. There is some clear overlap between the two, as sports fans are turning to these types of prediction platforms and placing wagers on college basketball, for example.
In an official statement shared on the regulator’s website, the MLGCC Agency Director, John Martin, had this to say:
"Kalshi does not hold a sports wagering license issued by the Commission, its wagers have not been approved by the Commission, and it is not otherwise authorized under Maryland law to offer wagers on sporting events."
Kalshi readies to push back against the argument that it offers "sports betting"
Martin doubled down on the argument that prediction markets are not unlike sports betting platforms, but unlike them, any licensed entity in the Old Line State had undergone a rigorous verification process.
Kalshi and other such platforms also did not meet the tax obligations that came with the offering of "wagering production," Martin insisted, explaining that the regulator viewed the current situation as a "legal" and "consumer protection" matter and was determined to act further on it.
"The commodity traders aren’t bound by those same guardrails. They’re conducting sports wagering without a license, and in doing so, they’re avoiding the collection of sports wagering taxes that legal operators pay to the State," he wrapped up.
Anticipating such pushback, Kalshi has been gearing up to fight back and has just appointed AGA veteran and sports betting advocate Sara Slane as Head of Corporate Development.
The platform has experience pushing back against the federal regulator, the CFTC, and it is currently fighting back against Nevada and New Jersey's respective gambling watchdogs.
