Maryland becomes sixth state to send Kalshi a cease-and-desist order

Kalshi has been hit with its sixth cease-and-desist order after the Maryland Lottery and Gaming Control Commission (MLGCC) became the latest state regulator to push back on sports event contracts. 

Robinhood and Crypto.com have also been issued the same order from the authority in the Old Line State, with all three warnings sent on Monday, April 7. 

Similarly to the complaints made by regulators in Nevada, New Jersey, Illinois, Ohio, and Montana, the MLGCC has accused all three companies of “offering and conducting what is, in fact, wagering on sports events” without the required license. 

Kalshi, Robinhood, and Crypto.com have all been given 15 days from receipt of the letter to confirm each has halted operations in Maryland. 

John Martin, MLGCC agency director, wrote: “Kalshi does not hold a sports wagering license issued by the Commission, its wagers have not been approved by the Commission, and it is not otherwise authorized under Maryland law to offer wagers on sporting events.”   

As outlined in the letters, the regulator’s stance is that given sports event contracts are traded based on a user’s prediction that a certain outcome will occur in the relevant game, the process is “indistinguishable from the act of placing a sports wager.” 

Kalshi has previously argued that the difference stems from its peer-to-peer swaps model, rather than that of a traditional sportsbook where the player is betting against the house. 

The MLGCC has also noted that licensed sportsbooks oversee age, identity, and geolocation verification measures, unlike prediction markets. 

Speaking to NottinghamMD, Martin added: “Each of Maryland’s legal sports wagering operators completed a rigorous licensing process and is subject to extensive regulations that include responsible gaming requirements. 

“The commodity traders aren’t bound by those same guardrails. They’re conducting sports wagering without a license and, in doing so, they’re avoiding the collection of sports wagering taxes that legal operators pay to the state.” 

Sports event contracts were first rolled out by Crypto.com just before Christmas, but Kalshi has since established itself as the dominant force within the burgeoning sector, accumulating more than $320m in trade volume over the course of the March Madness basketball tournament, as per Business Insider.

Currently, contracts are accessible in all 50 US states to any user aged 18 and over. 

Kalshi has argued that given it is regulated at federal level by the Commodity Futures Trading Commission (CFTC), state-level authorities such as the MLGCC do not possess the power to regulate sports event contracts. 

Despite this, the Nevada Gaming Control Board (NGCB) became the first regulator to publicly push back against the sector, before the Montana Gaming Control Division (GCD) also issued a cease-and-desist warning on March 26, though that order has only recently come to light. 

Jeremy S. Craft, chief legal counsel for the GCD, explained that event contracts that depend on the outcome of a game constitute sports wagering in the eyes of Montana law. 

One day on from Montana’s own order, the New Jersey Division of Gaming Enforcement (DGE) issued a similar instruction to both Kalshi and Robinhood, before the Illinois Gaming Board became the first to address Crypto.com as it called on all three to cease operations in the state. 

The Ohio Casino Control Commission (OCCC) soon followed suit, before Maryland became the most recent state to try and thwart the expansion of the prominent prediction markets. 

Elsewhere, the Michigan Gaming Control Board (MGCB) told EGR North America that it had opened an investigation into the sector’s presence within the state amid “consumer protection” concerns. 

However, the MGCB did note that it had not issued any cease-and-desist letters as of yet. 

Regulatory bodies in Arizona, North Carolina, and Kansas have also confirmed they are monitoring developments in other states before potential intervention. 

Kalshi has responded to the regulatory scrutiny by filing lawsuits against the authorities in Nevada and New Jersey, but no other states have been embroiled in court proceedings at this stage.