A three-member panel of the United States Fourth Circuit Court of Appeals seemed skeptical on Thursday of Kalshi’s arguments that its designated contract markets related to sporting events are subject to exclusive federal regulation and that Maryland authorities have overstepped limits on their power by attempting to curtail residents’ access to Kalshi’s prediction markets. While the judges also had poignant questions for counsel representing Maryland, oral arguments before the panel were anything but a slam dunk for Kalshi.
Kalshi was before the court on Thursday to seek a reversal of the district court’s refusal to grant Kalshi injunctive relief barring gaming regulators in Maryland’s enforcement of the state’s sports wagering laws. The hearing came days after Kalshi was involved in similar proceedings in the highest state court in Massachusetts.
Panel questions Kalshi’s characterization of event contracts tied to sporting events
Questioning from the panel on Thursday centered on the legal parameters around sports-related event contracts available on Kalshi, whether the Commodity Exchange Act (CEA) preempts Maryland’s gaming statutes related to Designated Contract Markets (DCMs), and how the Commodity Futures Trading Commission (CFTC) regulates platforms like Kalshi. The hearing began with statements from William Havemann, counsel for Kalshi.
Havemann pointed to the CEA and stated that the statute gives exclusive regulatory powers over DCMs to the CFTC, and that the district court erred in that its ruling “carved out an exception for state gambling laws without explaining how that could comport with the textual grant of exclusive jurisdiction to the CFTC over derivatives.”
Judge Stephanie Dawn Thacker responded that “…if there is exclusive jurisdiction over this, it seems to me that there might be an argument that there’s exclusive jurisdiction over all gambling, including, like state lotteries.”
Later in the dialogue between Havemann and the court, Judge Roger Gregory gave the most poignant signal that the court may not accept Kalshi’s positions on the issues of DCMs falling outside the scope of Maryland’s police powers.
“…you know, if it quacks, you know, it’s a duck, right? It’s gambling, isn’t it? So you do gambling, it’s basically gambling,” Gregory commented.
The panel also pressed Maryland Assistant Attorney General Max Brauer on the state’s position that the DCMs do not fit the statutory definition of “swaps” under federal law and are instead sports wagers. With the oral arguments concluded, the wait has begun to see whether the Fourth Circuit will side on the issue with the Third Circuit or the Sixth Circuit.
Potential for further divided circuit opinions on preemption and state sovereignty
Havemann referred to a recent ruling out of the US Third Circuit Court of Appeals in his opening statements, and the Fourth’s forthcoming decision will either align with or deviate from that decision. If the latter occurs, the ruling could align with a decision out of the US Sixth Circuit Court of Appeals instead.
In April, the Third granted Kalshi’s request for injunctive relief against New Jersey, agreeing with Kalshi that the DCMs fit the statutory definition of swaps and that the CFTC has exclusive jurisdiction. Later in the month, the Sixth denied such a request from Kalshi in regard to Ohio en route to expediting an appeal of the case.
The Maryland case springs from an April 2025 cease-and-desist demand from the state’s Lottery and Gaming Control Commission. In that action, the agency ordered Kalshi to stop offering trading of DCMs related to sporting events to people within Maryland’s borders.
The first week of May has been an active one for counsel representing Kalshi across the nation. The arguments before the Massachusetts Supreme Judicial Court on Monday echoed the discussion at the Fourth.
Counsel for Kalshi in Massachusetts also faces questions over nature of DCMs
Kalshi is also seeking injunctive relief on appeal from the Massachusetts Supreme Judicial Court, the state’s highest court. The request follows Massachusetts Attorney General Andrea Joy Campbell’s lawsuit against Kalshi in September 2025.
The trial court denied Kalshi’s request for injunctive relief in February, and the same issues came up during oral arguments on Monday in Boston. According to Nate Raymond of Reuters, Justice Scott Kafker said that, “if you want to gamble on a game, this is one way to do it” and that accepting Kalshi’s arguments “would be blocking out state regulation of what is in all respects a sports bet.”
If the Supreme Judicial Court does not grant the exchange injunctive relief, an earlier order giving Kalshi 30 days to geofence Massachusetts out of its area of operation would come into effect. Kalshi requested to have the case heard in federal court, but the US District Court for Massachusetts granted the state’s request to remand back to state court shortly following Campbell’s lawsuit.
Kalshi continues to face legal tests, especially in regard to DCMs connected to sports, in numerous US jurisdictions. This week’s events show that courts are wary of the arguments attempting to separate those contracts from state-regulated sports betting.
