Football season approaches, with Kalshi expanding its offerings in preparation
Kalshi's Sports Contracts Face Legal Challenges Amid Growing Tension Between Federal Regulation and State Gambling Laws
Kalshi, a platform that offers financial contracts based on sports outcomes, is currently embroiled in legal disputes with several states over its operations. The company has sent new sports contracts to the Commodity Futures Trading Commission (CFTC) for approval and aims to continue operating under federal regulation, even in states where traditional sports betting is illegal.
The latest setback for Kalshi came in Maryland, where a federal court ruled that the state's gaming laws are not preempted by federal law and can be enforced against the platform. A cease-and-desist letter was issued by the Maryland Lottery and Gaming Control Commission in April 2025, demanding Kalshi stop offering sports event contracts without a state license. This directive was upheld by a federal judge on August 1, 2025, who denied Kalshi’s request for a preliminary injunction.
Kalshi argues that its sports contracts are governed exclusively by the federal Commodity Exchange Act (CEA) under the jurisdiction of the CFTC, not state gaming laws. The company has sued Maryland and other states (Nevada, New Jersey) to assert federal preemption. However, unlike earlier wins in Nevada and New Jersey, Maryland’s court found that state gaming law can apply alongside federal regulation.
In response to legal uncertainty, Kalshi is expanding its sports contract offerings, including player touchdown props, point spreads, and over/under totals. This approach allows the platform to continue operating even in states where traditional sports betting is illegal, such as Texas and California, operating under a federally regulated framework rather than state-by-state licenses typical for sportsbooks like FanDuel or DraftKings.
The legal battle between Kalshi and state regulators illustrates the growing tension between federal regulation (CFTC/CEA) and state gambling laws, especially regarding new financial products based on sports outcomes. Courts and regulators differ by jurisdiction on how to classify Kalshi’s contracts—as federally regulated futures or as illegal sports betting under state laws.
| State | Regulatory Action | Legal Status / Court Rulings | Kalshi’s Position | |--------------|---------------------------------------------|----------------------------------------------------------------|--------------------------------------------------| | Maryland | Cease-and-desist; court denied injunction | State law enforcement allowed; federal preemption rejected | Argues federal preemption under CEA; appealed | | Nevada | Cease-and-desist; litigation ongoing | Initial injunctions favored Kalshi | Claims exclusive federal jurisdiction | | New Jersey | Similar enforcement and litigation | Preliminary injunctions granted for Kalshi | Same federal preemption argument | | Texas, CA | Sports betting illegal; platform operating under CFTC | No direct state enforcement against Kalshi publicly reported | Operates under federal CFTC regulation |
The outcomes of ongoing appeals and lawsuits will set significant precedents for how these platforms are regulated nationwide, potentially reshaping the boundary between federal preemption and state authority over sports wagering.
CEO Tarek Mansour claims that putting these markets under CFTC control provides protections like those in financial markets and safeguards against tampering. He also notes the potential to cut into the illegal betting world, estimated to be over $80 billion annually.
Kalshi has seen over $6 billion in trades since its inception, with approximately $2 billion of the trades being sports-related, added this year. Currently, people across the US can access agreements reflecting common football wagers, but their availability in the long run depends on legal and regulatory decisions.
The expansion of Kalshi's offerings is timed for the busy football season. If the contracts are approved, they can start trading immediately. The outcome of the current filings will determine how much Kalshi grows. The addition of spreads and props could lead to more complex products like parlays in the future.
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