Baltimore Files Lawsuit Against Kalshi and Polymarket for Unlicensed Sports Betting

Baltimore has filed a lawsuit against prediction market platforms Kalshi and Polymarket, alleging that both companies are offering sports betting without the necessary licenses required by Maryland law. This legal action adds to a growing list of over 20 similar cases across the United States.

The central issue in these lawsuits is whether prediction markets should be classified as financial products or as gambling, a distinction that determines regulatory oversight. Previously, Maryland regulators issued a cease-and-desist order to Kalshi regarding sports wagering in 2025, which Kalshi is currently appealing.

In addition to Baltimore's lawsuit, New York filed a case against Kalshi on July 31, 2026, aiming to halt its operations entirely and seeking significant fines. Kentucky also initiated lawsuits against both Kalshi and Polymarket in June 2026, making similar allegations of illegal sports betting activities. Furthermore, Tennessee ordered Kalshi, Polymarket, and Crypto.com to cease operations involving sports contracts in January 2026.

Kalshi and Polymarket argue that their event contracts are federally regulated financial products overseen by the Commodity Futures Trading Commission (CFTC). Kalshi previously won a landmark court battle against the CFTC in 2023, allowing it to list event contracts on elections. However, state regulators contend that if consumers can wager on sports outcomes, it constitutes sports betting, regardless of how the contracts are structured.

Polymarket, which operates on the Polygon blockchain, faces additional challenges as it has already imposed restrictions following a 2022 settlement with the CFTC that barred US users from the platform. The current wave of state lawsuits may compel Polymarket to implement stricter geoblocking measures or face escalating legal repercussions.

If courts determine that sports-related prediction contracts must comply with state gambling licensing requirements, it could lead to a complex regulatory environment similar to what major sportsbooks experienced after the Supreme Court overturned the federal sports betting ban in 2018.