793 F.Supp.3d 667
D. Maryland2025Background
- KalshiEX LLC (Kalshi), a federally regulated derivatives exchange, offers event-based contracts, including sports event contracts, to users in Maryland.
- Kalshi is registered as a Designated Contract Market (DCM) with the Commodity Futures Trading Commission (CFTC), allowing it to self-certify the contracts it offers.
- The Maryland Lottery and Gaming Control Commission (MLGCC) sent a cease-and-desist letter to Kalshi, asserting that its sports event contracts constituted illegal sports wagering under Maryland law.
- Kalshi filed suit seeking to enjoin Maryland from enforcing its gaming laws against Kalshi, arguing that the federal Commodity Exchange Act (CEA) preempts Maryland's laws as applied to its sports-event contracts.
- The court considered Kalshi's motion for a preliminary injunction based on its preemption argument, with several parties, including tribal gaming interests, submitting amicus briefs.
Issues
| Issue | Plaintiff's Argument (Kalshi) | Defendant's Argument (Maryland) | Held (Court) |
|---|---|---|---|
| Whether the CEA field-preempts Maryland's gaming laws | CEA occupies the entire field for DCMs, so state laws don't apply to sports event contracts on Kalshi | Regulation of gambling is traditionally state power; CEA does not clearly and manifestly preempt state gambling law | CEA does not preempt state gambling laws for DCMs; state authority preserved, especially for gambling |
| Whether the CEA conflict-preempts Maryland's gaming laws | State gaming laws create obstacles and inconsistent regimes with the CEA | State requirements do not conflict with CEA compliance; Kalshi can comply with both federal and state law | No conflict preemption; compliance with both CEA and state law is possible |
| Effect of Kalshi’s DCM status on Maryland authority | Federal DCM status should preclude state gaming law requirements | DCM status does not eliminate state power to regulate gambling within its borders | DCM status does not immunize Kalshi from state gambling law |
| Whether Kalshi meets the standards for a preliminary injunction | Likelihood of success due to preemption | No likelihood of success because CEA does not preempt Maryland’s law | Kalshi failed to show likelihood of success on the merits; injunction denied |
Key Cases Cited
- Merrill Lynch, Pierce, Fenner & Smith, Inc. v. Curran, 456 U.S. 353 (explains CEA's exclusive federal regulatory structure)
- Crosby v. National Foreign Trade Council, 530 U.S. 363 (framework for federal preemption analysis)
- Medtronic, Inc. v. Lohr, 518 U.S. 470 (presumption against preemption in traditionally state-regulated areas)
- Arizona v. United States, 567 U.S. 387 (field and conflict preemption standards)
- Florida Lime & Avocado Growers, Inc. v. Paul, 373 U.S. 132 (impossibility preemption standard)
- Hines v. Davidowitz, 312 U.S. 52 (obstacle preemption standard)
- Murphy v. National Collegiate Athletic Ass’n, 584 U.S. 453 (states’ authority to regulate gambling)