Prediction Markets in Maryland: The State That Said No to Kalshi

They are available, but their legality is unresolved and being fought over in a federal appeals court right now. As of August 2, 2026, a Maryland resident can open a Kalshi account and trade sports event contracts, because the state agreed to hold off on enforcement while the appeal plays out — not because a court has blessed the product. The underlying legal question, whether federal commodities law strips Maryland of the power to treat these contracts as gambling, was answered against the industry at the trial level and is now pending before the U.S. Court of Appeals for the Fourth Circuit.

To work out why the situation is this unstable, you have to separate three things that often get blurred together. First, there is the federal framework: platforms like Kalshi are registered with the Commodity Futures Trading Commission as designated contract markets, and they argue everything they list is a federally regulated financial product beyond any state’s reach. Second, there is Maryland law: the state built a licensed sports-betting market through the Maryland Lottery and Gaming Control Agency, and its regulators view unlicensed sports contracts as illegal betting dressed up as trading. Third, there is the courtroom scoreboard, which in Maryland has so far favored the state. Judge Abelson found that Kalshi had not shown Congress clearly meant to wipe out Maryland’s authority over gambling, and that a company could plausibly obey both federal and state rules at once. That reasoning is the opposite of what the Third Circuit later concluded for New Jersey, and it is why Maryland sits on the contested side of a genuine national split.

The honest bottom line: nobody trading in Maryland today is doing so under a court order that protects them. They are trading in a pause — a negotiated truce that ends the moment the Fourth Circuit rules or the state changes its mind. Everything below is meant to help you understand how durable that truce is likely to be.

Start with the piece of this saga that no other state can match, because it explains the machinery behind the entire anti-prediction-market push. In the spring of 2026, Spotlight on Maryland — a reporting partnership involving the Baltimore Sun, FOX45 News and WJLA — obtained internal records from the Maryland Lottery and Gaming Control Agency through a public-information request. Those records told an uncomfortable story about how the state’s official position was manufactured.

Back in April 2025, Maryland had sent a formal letter to the CFTC urging the agency to prohibit sports-related event contracts. On its face, that was exactly what you would expect a state gaming regulator to do. But the documents showed the American Gaming Association, the trade group representing commercial casinos, had supplied Maryland officials with a ready-made template letter making that same argument. Maryland’s version matched the AGA draft’s substance word for word, with only state-specific tweaks added. The association’s model opened by describing itself as the regulatory bodies charged with licensing and overseeing the legal gaming industry, expressing grave concerns about so-called sport event contracts. Maryland changed the plural bodies to the singular body and swapped in a Maryland reference, then sent it as the state’s own considered view. According to the reporting, the letter went out roughly eight days after the AGA handed over the draft.

The paper trail put a name on it. John Martin, director of the Maryland Lottery and Gaming Control Agency, wrote in an internal email dated April 22, 2025, that a possible action was a letter to be emailed to the CFTC commissioners, noting plainly that the letter had been provided by the American Gaming Association. The records reportedly also showed AGA materials circulating to Maryland officials that included draft CFTC letters and the commissioners’ email addresses — in other words, a full lobbying kit, not just talking points.

Maryland’s regulator pushed back on the framing. An agency spokesman said the office had independently evaluated the issue and reached its stance based on what serves the state’s best interests, and Martin has publicly cast the fight as a legitimate mix of legal, consumer-protection and fiscal concerns, once summarizing it as a legal matter and a consumer protection matter with a fiscal interest for the state attached. Both things can be true at once: the state may genuinely believe unlicensed sports contracts harm Maryland, and its public filing may still have been ghost-written by the casino lobby. The documents speak to the second point regardless of the first.

The industry seized on it hard. In December 2025, Kalshi, Crypto.com, Coinbase Global, Robinhood Markets and Underdog had formed the Coalition for Prediction Markets. In the summer of 2026, that coalition escalated, sending letters to roughly 20 state auditors and inspectors general — naming Maryland, Nevada, Utah, Minnesota and Illinois specifically — and accusing regulators of collusive behavior. The coalition argued that public records produced under Maryland’s disclosure law suggested the Lottery and Gaming agency may have been working in coordination with the AGA, other states and undisclosed entities to advance the private interests the association represents by keeping designated contract markets from offering event contracts. Whether that rises to anything actionable is a separate question, and no finding of wrongdoing has been made. But as a matter of public understanding, Maryland became the clearest window in the country into who is actually driving the campaign.

The legal fight ran on a parallel track to the lobbying story, and it is the reason Maryland matters to lawyers watching this space nationwide. After the Maryland Lottery and Gaming Control Commission moved against it, Kalshi sued in the U.S. District Court for the District of Maryland — the case captioned KalshiEX LLC v. Martin, naming director John Martin, docketed as No. 1:25-cv-01283-ABA. Kalshi asked the judge for a preliminary injunction: an order that would bar the state from enforcing its gambling laws against Kalshi’s sports contracts while the lawsuit proceeded. In most of the early state battles, judges granted that kind of relief. In Maryland, Judge Abelson did not.

On August 1, 2025, Abelson denied the injunction. His reasoning is worth understanding because it became a template other skeptical judges would echo. He leaned on the long-standing presumption that federal law does not casually displace areas states have always governed, and gambling regulation sits close to the core of a state’s traditional police powers. Against that backdrop, Kalshi had to show that Congress clearly and manifestly intended to strip states of their authority over betting when it wrote the Commodity Exchange Act. Abelson found the company had not carried that burden. He acknowledged the federal statute has at least some preemptive force, but concluded Kalshi failed to demonstrate a likelihood of success on the claim that federal commodities law overrides Maryland’s gaming laws. Crucially, he also found a platform could comply with both regimes at once — meaning there was no irreconcilable conflict that would force federal law to win.

That last point is the hinge. Preemption arguments are strongest when obeying state law would make it impossible to follow federal law, or when Congress plainly meant to occupy the whole field. Abelson saw neither. To him, Maryland was not trying to regulate the federal derivatives market; it was trying to stop what it viewed as unlicensed sports betting from reaching its residents, and nothing in federal law clearly forbade that. Kalshi read the same statute as a wall around anything a CFTC exchange chooses to list. The judge did not buy the wall.

Kalshi moved immediately. Within days it appealed to the Fourth Circuit and asked for a stay of the ruling pending appeal. Rather than let the dispute turn into a geofencing standoff, Maryland agreed to pause enforcement of its position against Kalshi’s sports contracts until the appeal is decided. That agreement is why the product never actually went dark for Maryland residents, and why the practical answer to whether you can trade today is yes even though the legal answer is unsettled.

The appeal, KalshiEX LLC v. Martin, No. 25-1892 in the Fourth Circuit, is where Maryland’s story currently lives. A three-judge panel heard oral argument on May 7, 2026, and the tenor of that hearing gave the industry little comfort. Reports from the courtroom described a panel skeptical of Kalshi’s central claims — that its sports-linked designated contract markets are the exclusive business of federal regulators, and that Maryland overstepped by trying to keep those products away from its residents.

The most quoted moment came from Judge Roger Gregory, who cut through the financial-product framing with a blunt characterization, telling Kalshi’s side that what it does is basically gambling. That is the whole fight compressed into three words. Kalshi’s entire legal edifice depends on the idea that a yes-or-no contract on a football game is categorically different from a bet on that game because it trades on a federally regulated exchange. When an appellate judge responds that it looks like gambling to him, the exchange wrapper starts to feel thinner. Maryland reinforced the point on the eve of argument by filing recent decisions from other courts — including rulings out of the Sixth Circuit and federal courts in Ohio and Michigan — that had preliminarily rejected the same preemption theory, offering them as supplemental authority.

As recently as August 2, 2026, the Fourth Circuit has not issued its decision. That silence is consequential. A ruling for Maryland would give the state-authority side its first federal appellate win and deepen the divide with the Third Circuit, which in April 2026 held for the industry in the New Jersey case. A ruling for Kalshi would ease the pressure but would not erase the trial-court loss below. Either way, the Maryland appeal is one of a small handful of cases — alongside a pending Ninth Circuit appeal out of Nevada — that legal observers expect to shape whether and how fast the Supreme Court takes up the question. For Maryland traders, the near-term stakes are direct: the enforcement pause is tethered to this appeal, so the day the panel rules is the day the truce is up for renegotiation.

Understanding Maryland requires understanding its regulator, because the whole conflict flows from a specific agency with a specific mandate. The Maryland Lottery and Gaming Control Agency, and its governing Maryland Lottery and Gaming Control Commission, oversee the state lottery, its six casinos, fantasy competitions and the licensed sports-betting industry that lawmakers authorized voters to approve in 2020. When Marylanders bet on a game through a licensed app, that agency is the body that vetted the operator, collected the license fee and takes the state’s cut of the revenue. That fiscal relationship is not incidental to the Kalshi dispute; it is part of why Martin openly framed the state’s interest as partly financial. Sports contracts that route around Maryland’s licensing regime also route around Maryland’s tax on sports wagering.

The enforcement action itself came on April 7, 2025, when the agency sent cease-and-desist letters to Kalshi, Robinhood and North American Derivatives Exchange — the Crypto.com-affiliated venue better known as Nadex — directing them to stop offering sports event contracts to Maryland residents. That order made Maryland the fifth state to take that step, part of a wave of cease-and-desist letters that swept across state gaming regulators in early 2025. Robinhood and Crypto.com’s distribution of these contracts made them natural targets alongside the exchange that actually lists most of them. Kalshi, characteristically, chose to fight rather than comply, which is what put the dispute in front of Judge Abelson in the first place.

The state’s legal posture has been reinforced from the attorney general’s office as well. Maryland’s attorney general joined a large multistate coalition — reported at more than 40 attorneys general — pressing the CFTC to recognize that states retain authority over sports-related prediction markets, rather than ceding the entire field to federal commodities regulators. That comment campaign, aimed at the CFTC’s rulemaking on event contracts, is the softer companion to the courtroom fight: even if the litigation is slow, the states want the federal agency itself to draw a line that leaves sports betting to them.

Maryland is not an outlier acting alone; it is one node in a country-spanning legal war, and its particular value is that it landed on the losing side for the industry at the trial level. That makes it a natural counterweight to the states where Kalshi won early. The industry’s marquee victory came in the Third Circuit’s New Jersey decision in April 2026, a divided ruling holding that sports event contracts are federally regulated swaps and that federal law preempts state gambling laws as applied to them on a registered exchange. Tennessee produced an early injunction favoring the platforms. But the picture is genuinely split. Federal judges in Ohio, and courts in Michigan and Washington, moved against the platforms; Arizona went furthest, with a district judge converting a temporary order into a permanent injunction that treated federal law as preempting the state statute in that specific posture. Nevada became the most aggressive enforcement state, and New York’s attorney general filed a sweeping state-court action against Kalshi at the end of July 2026.

Set against that, Maryland’s contribution is a clean, well-reasoned trial-court rejection of the preemption theory — the kind of opinion the state-authority side cites when it wants to show that Kalshi’s argument is far from a sure thing. If the Fourth Circuit affirms Abelson, Maryland stops being merely a district-court data point and becomes appellate precedent squarely against the Third Circuit. That is the fact pattern that historically prompts the Supreme Court to step in. Our national overview of where online gambling stands legally puts this circuit-by-circuit chaos in context, and the broader prediction markets hub tracks the platforms and rulings as they move.

If you have only ever used a Maryland sportsbook, the mechanics of a prediction market will feel familiar in some ways and alien in others. On a licensed app like FanDuel or BetMGM, you are betting against the house. The book sets the odds, the book pays winners out of its own margin, and the book profits when the numbers are shaded in its favor. A prediction market flips that structure. On an exchange like Kalshi, you are not betting against a bookmaker at all — you are buying and selling contracts against other traders. Every market is a yes-or-no question — will a given team win, will a number land above a threshold — and each contract expires at a dollar or at zero depending on the real-world outcome.

Prices behave like probabilities. A contract trading at 60 cents implies the crowd thinks there is roughly a 60 percent chance the answer turns out yes. You can buy the yes side or the no side, and you can often sell your position before the event resolves, taking a profit or cutting a loss the way you would trade a stock. Because the platform is matching buyers with sellers rather than booking bets, it earns fees on trading activity instead of a built-in vig. That order-book design is the technical heart of the industry’s legal argument — it is how they claim to be running a financial exchange rather than a sportsbook — even as judges like Roger Gregory look at the end result and see a wager on a ballgame. For a Maryland trader, the practical upshot is that pricing can be sharper than a sportsbook line on liquid markets, and that you are exposed to the crowd rather than to a house edge.

What you can trade here is broader than sports, and that breadth is part of why the legal fight is so tangled. Maryland residents using an available exchange can typically trade contracts across several categories. The state enforcement wave, and Maryland’s cease-and-desist letters specifically, targeted the sports category — the one that most resembles the licensed betting the state already taxes. The non-sports contracts have drawn far less state attention, though they raise their own federal questions.

Availability in Maryland is a moving target, and it differs sharply by platform depending on each company’s appetite for legal risk. Because the state paused enforcement rather than winning an order forcing an exit, the venues that chose to keep operating have been able to. Check any platform’s own state availability page before funding an account, since operators change their footprints as rulings land.

Beyond the three headliners, a wider field of CFTC-linked venues and pick’em apps touches the Maryland market. One nuance worth flagging: FanDuel built its prediction product to offer sports contracts only in states its sportsbook has not yet reached — and Maryland has a licensed FanDuel sportsbook, so FanDuel’s sports event contracts are designed to stay out of the state.

For the full roster of platforms and rulings across the country, the prediction markets hub tracks each operator as its footprint changes.

For a Maryland resident, the most practical way to understand a prediction market is to compare it with the sportsbook sitting right next to it on the phone screen — because the state treats them as fundamentally different things even when they look nearly identical. Maryland has a mature, legal online betting industry that launched in November 2022, and the differences are not academic.

The clearest gap is oversight. A licensed Maryland sportsbook operates under a state license, pays state taxes, and answers to the Maryland Lottery and Gaming Control Agency. If a dispute arises — a bet graded wrong, a withdrawal frozen, a self-exclusion request ignored — you have a state regulator to escalate to. A prediction-market contract sits under federal commodities rules instead. Age is another concrete divergence. A Maryland 18-year-old who cannot legally place a wager at a licensed sportsbook may be able to open a prediction-market account and trade a contract on the same game — a mismatch regulators and attorneys general have repeatedly cited. If you want to weigh the licensed route, our guide to Maryland sportsbooks lays out the legal apps, and the national roundups of states with online sportsbooks and the broader online sportsbooks hub show how Maryland compares.

Money won on a prediction market is taxable income, but the reporting is murkier than most Maryland bettors expect. Kalshi does not issue the 1099-B form that a typical brokerage sends for securities trades, and the IRS has not published formal guidance classifying event-contract gains — leaving open whether they are best treated as gambling winnings, ordinary income or something closer to a capital gain. That uncertainty is not a loophole; you still owe tax on your net gains, and Maryland assesses state income tax on top of federal. The practical difference from a licensed sportsbook is that the paperwork trail is thinner, which shifts more of the record-keeping burden onto you. None of this is tax advice, and anyone trading at volume should talk to a professional about how to report it.

The absence of a state safety net runs deeper than taxes. When you trade on a CFTC exchange from Maryland, you step outside the safety net the state built for its gambling market. There is no state-supervised dispute resolution, no Maryland problem-gambling exclusion list that binds the platform, and no state licensing review standing behind the operator. FanDuel’s prediction product is the sector’s notable exception, having voluntarily shipped deposit limits, self-exclusion tools and links to behavioral-health support — but that is a company choice, not a Maryland requirement, and it is also the product engineered to stay out of states like Maryland that already have a FanDuel sportsbook. For the venues that do operate here, the guardrails are whatever the platform decides to offer.

Maryland’s regional neighbors sit all over the map, which makes the mid-Atlantic a useful microcosm of the national mess. Just across the line, New Jersey delivered the industry its biggest win when the Third Circuit held that federal law preempts state gambling rules for these contracts — the exact opposite of Abelson’s Maryland reasoning. That contrast, two neighboring states reaching opposite conclusions, is the split in miniature. Farther out, Ohio courts moved against the platforms, and the Sixth Circuit was among the authorities Maryland cited to the Fourth Circuit. Pennsylvania, Virginia and Delaware round out a region where licensed sports betting is well established, which tends to sharpen a state’s incentive to defend its licensed market against untaxed competitors.

For anyone watching Maryland specifically, a short list of triggers will decide what happens next. The Fourth Circuit ruling is the big one: an affirmance hands the state-authority camp appellate precedent and likely stiffens Maryland’s enforcement resolve, while a reversal would loosen the pressure on Kalshi. The pending Ninth Circuit case out of Nevada could create or confirm the circuit split that pushes the Supreme Court to act. The CFTC’s own rulemaking on which event contracts are permissible could reshape the board before any court finishes. And Congress looms over all of it; federal legislation aimed at barring exchanges from listing sports-betting-style contracts would moot the Maryland case entirely. Until one of those dominoes falls, Maryland residents are trading in the gap between a state that objects and a federal framework that has not yet been told, definitively, who wins. For the wider legal landscape by jurisdiction, see the full state-by-state index and Maryland’s own Maryland gambling sites guide.

Primary and reporting sources, accessed as of August 2, 2026:

• Maryland Lottery and Gaming Control Agency (regulator) — mdgaming.com
• Office of the Maryland Attorney General, statement urging the CFTC to recognize state authority over sports-related prediction markets — oag.maryland.gov
• U.S. District Court for the District of Maryland, KalshiEX LLC v. Martin, No. 1:25-cv-01283; Fourth Circuit appeal No. 25-1892 — docket via CourtListener
• U.S. Commodity Futures Trading Commission, event-contract rulemaking and public comments — cftc.gov
• Spotlight on Maryland (Baltimore Sun / FOX45 / WJLA), reporting that casino lobbyists drafted Maryland’s letter to federal regulators — foxbaltimore.com
• Casino.org, Coalition for Prediction Markets accuses AGA and states of collusive behavior — casino.org
• Law.com / National Law Journal, coverage of the May 7, 2026 Fourth Circuit oral argument — law.com
• Sports Betting Dime, Maryland enforcement efforts against Kalshi paused pending appeal — sportsbettingdime.com

Availability, court schedules and enforcement postures in this area change frequently. Confirm any platform’s current status on its own site and verify case developments on the court docket before acting.

Maryland is the state that said no to Kalshi at the trial level and then became the clearest window in the country into how the anti-prediction-market campaign was built. Residents can trade on Kalshi and Robinhood today, but only because the state paused enforcement while the Fourth Circuit weighs an appeal that could end the truce the day it rules. There is no court order protecting traders, no state consumer safety net, and no guarantee about what happens to open positions if the ruling goes Maryland’s way. Trade informed, confirm each platform’s current status on its own site, and never stake more than you can afford to lose.