Baltimore has intensified its crackdown on gambling by targeting prediction market platforms, alleging they misled residents in violation of the city's Consumer Protection Ordinance.
On August 13, the city, led by Mayor Brandon Scott, filed lawsuits against Kalshi and Polymarket in the Baltimore City Circuit Court. The lawsuits claim these platforms are facilitating illegal sports wagering without the necessary licenses from Maryland.
The lawsuit against Kalshi also includes major financial platforms such as Robinhood, Webull, and Coinbase, which provide access to Kalshi's event contracts.
This marks Baltimore as the first city in the U.S. to take legal action against prediction market operators. Previously, Detroit had submitted an amicus brief in support of Michigan regulators regarding a federal lawsuit involving Coinbase.
The recent lawsuits are part of Baltimore’s broader initiative against online gambling businesses under its Consumer Protection Ordinance (CPO). Earlier this year, the city initiated legal proceedings against DraftKings and FanDuel for alleged predatory practices and later targeted six sweepstakes casino operators.
Central to Baltimore's lawsuits is the contentious issue of whether sports event contracts are considered federally regulated derivatives or illegal sports betting under state law. The complaint against Kalshi argues that these contracts fall under Maryland's definition of sports betting.
Despite the defendants labeling Kalshi as a 'prediction market,' the complaint asserts that it effectively operates as a platform for sports wagering as defined by Maryland law. The Maryland Lottery and Gaming Control Commission previously issued a cease-and-desist order to Kalshi, stating that purchasing its sports contracts is akin to placing a sports bet.
In response, Kalshi filed a lawsuit against Maryland in federal court, claiming its contracts are governed solely by the Commodity Exchange Act. However, a federal judge denied Kalshi's request for a preliminary injunction.
Baltimore is taking a different approach, alleging that these companies violated the city's CPO by misleadingly presenting their sports contracts as legal in Maryland. The complaint accuses Kalshi, Robinhood, Webull, and Coinbase of creating a deceptive impression regarding the legality of their offerings, particularly noting that their platforms allow users as young as 18, while Maryland law requires participants in sports wagering to be over 21.
Furthermore, the complaint against Polymarket emphasizes consumer protection, alleging inadequate disclosure of risks related to insider trading and market manipulation. Baltimore argues that Polymarket's features increasingly resemble those of a traditional sportsbook.
The city is seeking a court order to halt unauthorized sports wagering activities and transactions from Baltimore residents on these platforms. Additionally, it is pursuing restitution for affected consumers, the return of profits deemed ill-gotten, and the maximum civil penalties allowed under the CPO.