Key facts
- Baltimore has sued prediction market platforms Kalshi and Polymarket for allegedly violating gambling laws.
- The city claims these platforms operate as unlicensed sports betting operations.
- The lawsuits dispute the companies' classification of event contracts as legal trades.
- Robinhood, Webull, and Coinbase are named as partners in the lawsuit against Kalshi.
- The CFTC asserts federal jurisdiction over prediction markets, classifying event contracts as 'swaps'.
The City of Baltimore, through Mayor Brendan Scott, has initiated legal action against prediction market platforms Kalshi and Polymarket, accusing them of operating illegal, unlicensed sports betting operations and misleading users about the regulatory status of their products. The lawsuits contend that the event contracts traded on these platforms constitute unlawful wagers under Maryland state law, directly challenging the companies' assertion that these are legal event contracts.
Notably, the complaint filed against Kalshi also implicates Robinhood, Webull, and Coinbase, identifying them as partners accused of deceptive practices for marketing sports contracts as lawfully tradable assets in Maryland. This legal move highlights a growing tension between state and federal regulatory approaches to prediction markets.
The US Commodity Futures Trading Commission (CFTC), led by Chair Michael Selig, maintains that event contracts on prediction markets fall under its purview as 'swaps.' This federal stance contrasts with Baltimore's position and that of other state authorities, who argue for state and local regulatory control. A spokesperson for Polymarket emphasized that city-specific actions conflict with the CFTC's established framework, asserting that prediction markets on CFTC-registered exchanges are governed by federal law, not a fragmented system of state and local rules. This dispute is expected by many experts to potentially reach the Supreme Court.