And then there were six.
On Monday, Maryland became the sixth state in the U.S. (that we're aware of thus far) to send cease-and-desist letters to federally regulated "prediction markets" offering de facto sports wagering via event contracts.
Key insights
- Officials in Maryland, Ohio, Illinois, New Jersey, Nevada, and Montana have sent cease-and-desist letters in connection with federally regulated sports event contracts.
- Those contracts are a growing form of competition for state-regulated sportsbooks.
The letters were sent by the Maryland Lottery and Gaming Control Commission to Kalshi, Robinhood, and Crypto.com, all of which have received similar correspondence from other state regulators.
"Kalshi is operating in Maryland and is offering and conducting what is, in fact, wagering on sporting events," Maryland Lottery and Gaming Control agency director John Martin wrote in one of the letters. "However, 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."
For these reasons, Martin added, Kalshi and the others are being directed by the commission to "immediately cease and desist these legal offerings" in the state. The prediction markets have 15 days to notify the regulator that they are complying.
The letters from the Maryland sports betting regulator follow similar ones sent by officials in Nevada, New Jersey, Ohio, Illinois, and, according to Kalshi CEO Tarek Mansour, Montana.
Join the club
Those efforts represent rising awareness of and opposition to federally regulated prediction markets like Kalshi. That opposition has ramped up since event contract trading expanded to include sports outcomes, like the Super Bowl and March Madness.
Sports event contracts are now providing users with the opportunity to make de facto wagers on various games and leagues in all 50 U.S. states, not just the ones that have legalized sports betting. Therefore, they are a growing source of competition to state-regulated sportsbook operators like DraftKings and FanDuel.
Kalshi, for example, has facilitated more than $380 million in trading in March Madness-related contracts, such as users buying "yes" contracts for Houston to win the men's college basketball championship.
Kalshi, Robinhood, and Crypto.com are also all regulated by the federal Commodity Futures Trading Commission (CFTC), not states.
In Nevada and New Jersey, where Kalshi is pushing back on the cease-and-desist letters, the company has argued it is subject to federal law and oversight.
“We are literally like a financial exchange, but the underlying trading is events,” Kalshi CEO Tarek Mansour said in a recent TechCrunch interview. “The CFTC is our regulator. If the CFTC tells us to stop, we will absolutely stop. If they don’t, then we won’t.”
