Baltimore Sues Kalshi and Polymarket, Challenging CFTC Authority Over Sports-Related Prediction Markets

Baltimore Mayor Brandon Scott and the City Council filed lawsuits Thursday against prediction market operators Kalshi and Polymarket, accusing the companies of running unlicensed sports-betting platforms disguised as financial trading products. The complaints, filed in Baltimore City Circuit Court, allege the companies violated the city’s Consumer Protection Ordinance by offering wagers on game winners, point spreads, point totals, and player statistics without holding the sports-betting licenses Maryland law requires.

The legal action lands in the middle of a much larger fight over who actually has authority to regulate prediction markets, and it arrives while a federal appeals court is still weighing a related question that could shape the outcome. Baltimore is seeking an injunction barring both companies from accepting transactions from city residents, along with civil penalties of up to $1,000 per violation per day, restitution for affected consumers, and the return of profits tied to the alleged violations.

Sports Bets Wrapped in a Different Label

The core of Baltimore’s argument is that Kalshi and Polymarket are functionally operating sportsbooks while calling their products “event contracts” or “prediction-market trades” to sidestep state gambling law. “These companies are running sportsbooks without licenses and betting that a new label will put them above the law,” Scott said in a statement announcing the suits. “It won’t. Baltimore will not let multibillion-dollar companies put profits over people and harm our communities through illegal gambling.”

The complaint against Kalshi goes further than the platform itself, naming Robinhood, Webull, and Coinbase as partner companies accused of the same deceptive marketing — specifically, giving users the impression that sports contracts can lawfully be purchased and traded in Maryland. The city also points to an age gap as evidence of the regulatory mismatch: Kalshi and Polymarket allow users as young as 18, while Maryland sportsbooks require bettors to be at least 21.

A Fight Already Headed for the Fourth Circuit

Baltimore’s lawsuits are not the first shot fired in this dispute. Maryland’s gambling regulator issued a cease-and-desist order against Kalshi last year, arguing its sports-related event contracts were “indistinguishable” from traditional sports bets. Kalshi sued the state in response, and a federal judge later declined to block Maryland’s enforcement action. Kalshi appealed, and the case is now before the Fourth U.S. Circuit Court of Appeals, which heard oral arguments in May without issuing a ruling as of the city’s filing.

Both companies pushed back hard on the city’s authority to act at all. “This is nothing more than an effort to relitigate the same case that’s currently under appeal before the Fourth Circuit. It’s clearly political theater by Mayor Scott,” a Kalshi spokesperson said. “Kalshi is not violating any consumer protection laws; it’s operating lawfully under the exclusive jurisdiction of its federal regulator.” Polymarket offered a similar defense, telling reporters that “city-specific action runs counter to the CFTC’s established framework for regulating prediction markets. As courts have recognized, prediction markets on CFTC-registered exchanges are governed by federal law, not a patchwork of state and local rules.”

That federal-versus-state jurisdictional question remains legally unsettled. Both companies maintain that because users trade “event contracts” rather than placing bets, oversight belongs solely to the Commodity Futures Trading Commission, which regulates them as swaps. States and now at least one major city argue otherwise, and attorneys following the case note it’s still genuinely murky whether the CFTC’s jurisdiction extends to sports-linked contracts that function like wagers on game outcomes, point totals, and player props — the exact kind of markets found across NFL, NBA, and college sports.

What Comes Next

With the Fourth Circuit’s ruling still pending and Baltimore now pressing its own case at the local level, the prediction-markets-versus-sportsbooks dispute is escalating rather than resolving. Legal observers following the broader fight expect it could eventually reach the Supreme Court given the stakes for both the multibillion-dollar prediction market industry and state gambling regulators trying to protect licensing revenue and consumer protections built into regulated sportsbook markets. For now, Kalshi and Polymarket continue operating in Baltimore and across most states while the legal questions play out in court.