The Maryland Lottery and Gaming Control Commission has demanded that Kalshi, Robinhood and Crypto.com stop offering trading on sports events on their prediction market platforms.
The state regulator sent cease-and-desist letters to all three companies on Monday, April 7.
The agency wrote in the letters that the firms are “offering and conducting what is, in fact, wagering on sports events” despite not holding a state license to do so.
The Lottery gave the three operators 15 days from the date on the letters to confirm they have complied with the cease-and-desist notice.
Sports contracts ‘indistinguishable’ from sports betting
The notices also stressed that as contracts are purchased based on the prediction or belief that a certain sporting outcome will occur, and as that outcome is the basis for determining whether payment will be made to the purchasers of the contract, they are “indistinguishable from the act of placing a sports wager.” As such, says the commission, the existence of these markets circumvents Maryland law.
Maryland’s regulator also noted that the law requires that sports wagering operators conduct customer age, identity and geolocation verification, which it asserts that prediction markets do not do.
“We view this as a legal matter and a consumer protection matter, and there is also a fiscal interest for the State,” said Maryland Lottery and Gaming Director John Martin, as quoted by local media. “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.”
Maryland has not been afraid to chase away companies it believes are offering services that mimic online gaming without a license. Last month, it ordered VGW and High 5 Casino to stop offering products that the regulator said resemble online casino gaming. The Lottery now keeps a list of all companies to which it has sent cease-and-desist letters.
Prediction markets are the trendy target
While other states also continue to take action against online gaming operators, prediction markets are perhaps the most high-profile targets of all right now.
Maryland is the sixth state to issue a cease-and-desist letter to at least one of Kalshi, Robinhood or Crypto.com. The gaming regulators in Illinois and Ohio have done the same for all three companies, while Nevada and New Jersey have both issued a notice to Kalshi, with the New Jersey Division of Gaming Enforcement (DGE) writing to Robinhood as well.
Kalshi CEO Tarek Mansour confirmed in an interview with TechCrunch that Montana has also sent a C&D to his company. Other states such as Massachusetts and Connecticut are investigating prediction markets but have not taken official enforcement action in the form of C&Ds.
Kalshi has filed federal lawsuits in both Nevada and New Jersey to fight those regulators’ efforts to shut it down, arguing that states do not have the power to supersede what it believes is a federal right to offer event contracts under Commodities Futures Trading Commission (CFTC) regulations.
In a filing in response, the Nevada Gaming Control Board made a number of counter-arguments, including citing Kalshi’s own argument from its pending case on election event contracts, in which the company argued that sports contracts were never the intent of these markets when Congress passed the Commodities Exchange Act (CEA) in 1936.
