Baltimore Sues Kalshi Polymarket Over Illegal Sports Betting

• Baltimore has sued Kalshi and Polymarket over alleged illegal sports betting operations.
• The city claims that prediction markets are essentially sportsbooks in disguise, operating without proper licenses or regulatory oversight.
• Kalshi and Polymarket argue that they comply with federal regulations and are therefore shielded from state laws.
• Several states have previously taken action against these companies for allegedly violating consumer protection laws.

The city claims that by allowing users to wager on game outcomes, point spreads, and player statistics, Kalshi and Polymarket are engaging in illegal gambling activities.

The city of Baltimore has filed a lawsuit against Kalshi and Polymarket, two companies that operate prediction markets. At the heart of the dispute is whether these platforms are essentially sportsbooks in disguise, operating without proper licenses or regulatory oversight. The city claims that by allowing users to wager on game outcomes, point spreads, and player statistics, Kalshi and Polymarket are engaging in illegal gambling activities. This assertion is not new; Maryland's gaming commission has previously described event contracts as 'indistinguishable' from traditional bets. By operating outside the bounds of state regulations, Kalshi and Polymarket may be putting profits over people and harming local communities through unregulated betting.

The rise of prediction markets has created a regulatory conundrum for states like Maryland. While some argue that these platforms are subject to federal preemption under Commodity Futures Trading Commission regulations, others contend that state laws still apply. This debate is not new; in April, a Third Circuit panel found that states lack authority to regulate prediction markets, citing the CFTC's exclusive jurisdiction over derivatives. However, this ruling has been met with skepticism by some, who point out that Kalshi and Polymarket have successfully navigated federal regulations in the past. The question remains: do these companies' efforts to comply with federal law shield them from state regulations?

Baltimore's lawsuit is not an isolated incident; several other states, including Nevada, Massachusetts, and Washington, have previously taken action against Kalshi and Polymarket. In July, New York's attorney general filed a similar suit, weeks after a federal judge refused to block state regulators from enforcing gambling laws against these companies. The city of Baltimore is now joining this chorus, alleging that Kalshi and Polymarket have deceptively represented their services as lawful in Maryland and unfairly disregarded the state's consumer protection laws. By doing so, they may be putting thousands of consumers at risk.

Lawyers and compliance officers should watch for potential regulatory exposure as states continue to grapple with the legality of prediction markets, which may be subject to federal preemption under CFTC regulations.

Source: Original reporting via CN