Kalshi’s Legal Flip on Sports Contracts Faces Maryland Court Scrutiny

A Sudden Shift in Strategy

In a high-stakes legal battle, KalshiEX LLC is challenging the Maryland Lottery and Gaming Control Commission’s authority to regulate its sports event contracts, claiming they are legitimate derivatives overseen solely by the Commodity Futures Trading Commission (CFTC).

Better Markets, a financial reform advocacy group, reported that this argument marks a stark reversal from Kalshi’s earlier position in a separate case against the CFTC.

“The betting platform KalshiEX has launched a number of lawsuits to fend off any state regulation,” Better Markets noted, highlighting the company’s pivot. The shift has drawn sharp judicial scrutiny, with Maryland’s federal court pressing Kalshi to explain its conflicting narratives.

From Gaming to Derivatives

Kalshi’s earlier stance came in a 2024 lawsuit against the CFTC, where it sought approval for election outcome contracts. To distinguish those from gambling, Kalshi argued that sports event contracts were “gaming” instruments, lacking “financial, economic, or commercial” consequences and unfit for a CFTC-regulated exchange like its own.

“That was central to its claim that election gambling contracts are fundamentally different from sports wagers,” Better Markets explained. The D.C. district court accepted this, ruling against the CFTC and allowing Kalshi’s election contracts.

Yet in its April lawsuit against Maryland, filed after a cease-and-desist order, Kalshi now insists those same sports contracts are “perfectly appropriate” for CFTC-approved derivatives trading, preempting state oversight. This contradiction, Better Markets says, gives “whiplash” to observers.

Maryland’s Regulatory Pushback

The Maryland Lottery and Gaming Control Commission issued cease-and-desist letters on April 7 to Kalshi, Robinhood, and Crypto.com, arguing their sports prediction markets mimic sports wagering, which Maryland law restricts to licensed operators.

Director John Martin stated, “Kalshi is operating in Maryland and conducting what is, in fact, wagering on sporting events.” Licensed sportsbooks, contributing $61.2 million to education in fiscal year 2025’s first eight months, face strict rules like age and geolocation verification, which Kalshi lacks.

Kalshi’s lawsuit, filed April 21 in Maryland’s federal court, seeks a temporary restraining order, asserting CFTC’s “exclusive jurisdiction” under the Commodity Exchange Act trumps state law. Maryland, joined by states like Nevada and New Jersey, counters that these contracts are unlicensed betting, undermining consumer protections.

Judicial Skepticism Surfaces

Maryland’s Judge Adam Abelson zeroed in on Kalshi’s about-face. “Why did Kalshi say the opposite to the D.C. Circuit?” he asked, citing Kalshi’s prior claim that “Congress did not want sports betting to be conducted on derivatives markets.” Abelson requested supplemental briefings to clarify how Kalshi’s earlier statements should shape the court’s view, a move Better Markets called “on target.”

The group argued, “A derivatives exchange cannot speak out of both sides of its mouth and expect no one to notice.” The judge’s scrutiny could weaken Kalshi’s defense, especially if judicial estoppel bars it from contradicting prior arguments.