Federal Judge Hands Defeat to Company Offering Sports Event Contracts

A federal judge from the District of Maryland has denied Kalshi’s motion for a preliminary judgment, which would have allowed the company to offer sporting event contracts in Maryland.

Reveling in the legal victory was the defendant, the Maryland Lottery and Gaming Control Commission, which claimed that Kalshi’s offering is tantamount to sports betting and thus it was seeking to work around the regulators.

Daniel Wallach, an expert at the intersection of sports better and the law, offered the following assessment of the legal setback, Kalshi’s first after courts in Nevada and New Jersey had ruled in its favor:

“It was evident from the May 28th oral argument transcript that Judge Abelson viewed the preemption issue as laser-focused on the narrow question of whether Congress intended for this specific type of product, i.e., sports betting, to be included on CFTC-regulated futures markets. Remember, Kalshi wanted to frame the preemption issue much more broadly, claiming that the CEA granted the CFTC exclusive jurisdiction over ‘all’ contracts traded on its exchanges.

Judge Abelson was having none of that. Here is a quote from the 5/28 oral argument: ‘The burden of proving preemption as to this specific type of product ultimately boils down to one of congressional intent. It’s possible that this is a type of product that Congress did not intend to preempt even if it intended to preempt regulation of grain futures.’

Once he said that, Maryland became the prohibitive favorite.

Here’s why:

• The Wire Act
• PASPA
• IGRA
• 2010 legislative history (Sens. Lincoln and Feinstein)

The Murderer’s Row of congressional intent.

From Judge Abelson’s opinion: 

• “Kalshi has not established a likelihood of success on the merits of its claim that Maryland’s laws regulating sports betting have been preempted by the Commodity Exchange Act.”
• “There is a strong presumption against preemption. ‘In all preemption cases, and particularly in those in which Congress has ‘legislated . . . in a field which the States have traditionally occupied,’ . . . [courts] ‘start with the assumption that the historic police powers of the States were not to be superseded by the Federal Act unless that was the clear and manifest purpose of Congress.’”
• “We rely on the presumption because respect for the States as ‘independent sovereigns in our federal system’ leads us to assume that ‘Congress does not cavalierly pre-empt state-law causes of action.’”
• “Thus, the presumption against preemption applies, and thus the question presented is whether Kalshi has shown that one of Congress’s “clear and manifest purpose[s]” when it enacted the Dodd-Frank Act was to preempt states’ or tribes’ authority to regulate gambling if a DCM were offer sports wagers on a DCM platform.
• “When Congress enacted and amended the CEA, it was highly unlikely to have intended to override state laws that regulate sports betting such as Maryland’s gaming laws, because at those times it was already largely illegal federally to engage in sports gambling (under either the Wire Act in 1974 or PASPA in 2010).”
• “Kalshi’s proposed statutory interpretation would necessarily entail at least a partial implied repeal of the IGRA and the Wire Act.”
• “It is highly unlikely that Congress would have overridden state gambling laws without at least some indication in the text and legislative history that it intended to do so.”
• “The structure, context and legislative history of the CEA do not support Kalshi’s argument, let alone establish that Congress clearly and manifestly intended to preempt state sports-betting laws.”
• “The limited legislative history that exists from 2010 that bears on the scope of Congress’s preemptive intent cuts against preemption. Senator Feinstein expressed concern about ‘derivative contract[s]’ being ‘used predominantly by speculators or participants not having a commercial or hedging interest,’ and so did not understand Dodd-Frank to authorize ‘gambling’ contracts that ‘served no commercial purpose at all.’”
• “Senator Lincoln opined that an ‘event contract’ ‘around sporting events’ would ‘not serve any real commercial purpose,’ but instead ‘would be used solely for gambling.'” 156 Cong. Rec. S5902-01, S5907 (July 15, 2010) (statement of Senator Lincoln).”
• “That contemporaneously expressed concern makes it even less likely that Congress intended for Dodd-Frank to render obsolete state laws limiting or regulating gambling for transactions that Congress brought within the purview of the CEA pursuant to Dodd- Frank.”
• “Here, the weight of the evidence strongly confirms that Congress did not intend for Dodd-Frank to constitute legislation not only legalizing sports betting nationwide, but displacing states’ authority to regulate it, including when such betting takes place on a website of a company that happens to have been designated as a commodity futures DCM.”
• “And even if the evidence were in equipoise (which it is not), the presumption against preemption would require rejecting Kalshi’s field preemption theory. In short, Kalshi has not shown a likelihood of success on the merits that the CEA has the effect of field-preempting the regulation of sports-event contracts that are traded on DCMs.”

Wallach Predicted the Ruling in April

His earlier analysis appeared in Forbes (Kalshi’s Nevada Court Win May Be Short-Lived Due To Federal Wire Act Ban On Sports Betting, https://www.forbes.com/sites/danielwallach/2025/04/15/kalshis-nevada-court-win-may-be-short-lived-due-to-federal-wire-act-ban-on-sports-betting/), which he shared:

• “Congress isn’t shy when it comes to setting a clear federal policy on the divisive subject of sports gambling. In every instance, it has done so explicitly – starting with the Wire Act of 1961, which prohibits the interstate transmission of wagering information related to any “sporting event of contest” (a ban which is still in effect), and further exemplified by the Professional and Amateur Sports Protection Act of 1992, which, until its demise in 2018, prohibited state-authorized sports wagering. The Third Circuit referred to these laws as exemplifying a ‘federal policy of disfavoring sports-gambling.’

• “Sports gambling is also specifically addressed in a number of other federal statutes, including the Sports Bribery Act, the Wagering Paraphernalia Act, and the Federal Wagering Tax Act.”

• “When Congress wants to address sports gambling, it barges in through the front door. It doesn’t try to sneak in a comprehensive regulatory scheme through the back door, especially given its past unwavering opposition to sports gambling.

• “So, you can only imagine my utter surprise to find out that more than 15 years ago – when PASPA was still in effect (and so, too, was the Wire Act) – Congress silently approved wagering on sporting events in all 50 states for any U.S. resident 18 years of age and older (which is the minimum age for trading in Kalshi’s ‘sports-based’ event contracts).

• “The notion that Congress had already vested a federal agency with exclusive jurisdiction to regulate sports wagering on a federally-regulated commodities exchange – and did so prior to the commencement of the PASPA litigation in 2012 – would certainly have been welcome (if not shocking) news to the professional sports leagues, the NCAA and U.S. Department of Justice, which were on the losing side of Murphy v. NCAA because there was no federal statutory regime in place to regulate sports wagering; just a blanket prohibition (i.e., PASPA) directed at state governments. They might have won the Murphy case if only they had known about the CFTC’s exclusive jurisdiction to regulate sports-related event contracts on commodities exchanges.

• “That premise is as ridiculous as it sounds. Even Kalshi recognizes that – or at least it did in a prior litigation with the CFTC – when it asserted in an appellate brief filed with the D.C. Circuit that “Congress did not want sports betting to be conducted on a derivatives exchange.

• “If we’ve learned anything from over 60 years of federal policymaking on sports gambling, it’s that when Congress acts in this area, it does so explicitly (and usually with great fanfare) – as evidenced by the Wire Act and PASPA – such that it borders on the absurd to think that Congress would ever green-light federally regulated sports wagering solely by implication and have it overseen by an agency which lacks the requisite subject-matter expertise, especially after devoting more than a half-century of federal policymaking to disfavoring that activity.

• “The very existence of the Wire Act – along with PASPA (which was still in effect when the special rule was enacted in 2010) – belies any suggestion that Congress intended to ‘field preempt’ the sports gambling regimes of every state when it vested the CFTC with ‘exclusive jurisdiction’ over trading on CFTC-designated exchanges where such activity would have contravened the longstanding federal policy against sports betting.”