Maryland Slaps Kalshi with Cease-and-Desist Letter

Maryland has become the sixth state to issue a cease-and-desist order to Kalshi, a prediction market for trading event contracts. This aligns with a strong pushback against the platform, as well as with a broader pushback against betting alternatives.

Kalshi Has Been Growing Steadily

Kalshi, which offers contracts on the outcomes of sports and other events, has been growing steadily. The platform skyrocketed in popularity ahead of the presidential election in the US, tapping into the incredibly high demand for political betting.

However, Kalshi’s growth has also made it enemies in the gaming market, some of which believe that its products constitute unregulated gambling.

Kalshi’s event contracts fall under the jurisdiction of the Commodity Futures Trading Commission (CFTC), unlike betting operators which are regulated by state authorities. This has irked opponents of prediction markets who have claimed that such products have a huge advantage since they don’t need to navigate the complex regulatory landscape.

As a result, several state regulators ordered Kalshi to cease and desist, with Maryland being the latest to do so.

Maryland Orders Kalshi to Leave

As reported by gaming lawyer Daniel Wallach, the Maryland Lottery and Gaming Control Commission has sent a cease-and-desist letter to Kalshi, ordering it to immediately halt its operation in the state.

In its letter, the authority claimed that Kalshi’s contracts on the outcomes of events constitute illegal sports betting. The commission defined Kalshi’s products as exchange wagers, which are “wagers in which a bettor wagers with or against another bettor through a sports wagering licensee.”

Since Kalshi does not hold a license in Maryland it is not legally permitted to offer such products, the Maryland Lottery and Gaming Control Commission said.  

Kalshi has so far challenged cease-and-desist orders. Wallach predicted that the order in Maryland would lead to a new lawsuit.

Kalshi Unfazed by Orders

The cease-and-desist order in Maryland is the latest in a row of similar orders. The platform was recently told to also halt its operations in Nevada, Illinois, Ohio, Montana, and New Jersey. For reference, as a CFTC-licensed operator, Kalshi offers prediction markets in all 50 states.

In the meantime, the platform is currently being investigated in Connecticut.

Kalshi’s founder, Tarek Mansour, addressed the matter prior to the sixth order, saying that he isn’t very concerned about the cease-and-desist orders his team has received. He insisted that Kalshi answers only to the CFTC and that state regulators have no power over it. The founder also suggested that the regulatory action against it has been prompted by casino lobbyists who are not happy about the new format’s growth.

Mansour added that if the CFTC orders it to stop, it will comply.

The Regulated Gaming Sector Strikes Back

Prediction markets are the latest novel gaming alternative to challenge the established regulatory landscape. While platforms, such as Kalshi, have a strong legal standing thanks to the CFTC’s recognition, there have been other formats that commercial and tribal gaming stakeholders have been unhappy about.

These include the likes of skill games and sweepstakes, which generally exploit legal loopholes to operate in a legal gray area. Maryland recently sent a cease-and-desist order against VGW, one of the largest sweepstakes operators targeting America.