Kalshi, a federally regulated prediction market company, faced its first legal setback when a U.S. District Court judge denied its request for a preliminary injunction to operate sports event contracts in Maryland. The court ruled that Kalshi failed to prove that the federal Commodity Exchange Act (CEA) preempts Maryland’s state gambling laws, concluding that Congress did not intend for the CEA to override state-level sports betting regulations. This decision prevents Kalshi from offering its sports-related prediction markets in Maryland during the ongoing lawsuit with the Maryland Lottery and Gaming Control Commission, which treats Kalshi’s contracts as unlicensed sports betting.

This ruling contrasts with previous court decisions in New Jersey and Nevada, where Kalshi was allowed to continue operations during litigation. Kalshi has since filed a motion for an injunction pending appeal, arguing that geofencing Maryland users would be costly and time-consuming. The ongoing lawsuit could have significant implications for whether federally regulated prediction markets like Kalshi can legally operate as sportsbooks nationwide without adhering to individual state gambling laws.