The Baltimore Mayor and City Council of Baltimore filed lawsuits against Kalshi and Polymarket on Thursday, accusing the platforms of acting as illegal gambling operators.
The lawsuits also claim that the prediction market companies misled customers about the legality of their platforms.
Key Takeaways
- The separate lawsuits claimed that both operators needed to be licensed by state officials.
- Prediction market operators have consistently claimed they are federally regulated by the Commodity Futures Trading Commission.
- Baltimore is seeking civil penalties, injunctive relief, restitution, disgorgement, and additional relief.
According to court filings submitted in the Circuit Court for Baltimore City, Kalshi and Polymarket violated the guidelines established by Baltimore’s Consumer Protection Ordinance. This stemmed from the platforms offering game winner, point sprea, point total, and player prop event contracts, which represent betting odds offered by sportsbooks.
“These companies are running sportsbooks without licenses and betting that a new label will put them above the law,” Mayor Brandon M. Scott said in a press release. “It won’t. Baltimore will not let multibillion-dollar companies put profits over people and harm our communities through illegal gambling.”
Both Kalshi and Polymarket have previously contended that event contracts in prediction markets — which are traded in a peer-to-peer system — are not the same as house-made odds offered by sports betting sites. The complaints did not agree with that definition.
The lawsuits also attacked the operators for offering sports betting services without being licensed by the Maryland Lottery and Gaming Control Agency, as is required by state law.
“Kalshi and Polymarket cannot circumvent Baltimore's consumer protections by repackaging gambling as something else or claiming federal regulation puts them beyond the reach of our laws,” said City Solicitor Ebony M. Thompson. “The City will continue to use its consumer protection authority to stop deceptive and unlawful conduct and hold companies accountable when they put our residents at risk.”
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Problems for customers
The announcement released by Mayor Scott and the City of Baltimore said that Kalshi and Polymarket’s improper portrayal of their platforms as legally licensed and regulated can create problems for “vulnerable populations,” such as young adults and individuals displaying problem gambling behaviors.
“Allowing prediction market companies to evade gambling laws would set a dangerous precedent far beyond Baltimore,” said DiCello Levitt Founding Partner, Adam Levitt. “These companies cannot be permitted to use new terminology and new technology to operate outside the rules designed to protect consumers and communities.”
Prospective sports betting licensees in Maryland must apply through the Maryland Lottery and Gaming eLicensing system, register with the Department of Assessments and Taxation, pass a background check by the Sports Wagering Application Review Commission, and pay various fees. Approved operators also need to share 20% of taxable revenue with the local government.
Baltimore is ultimately seeking civil penalties, injunctive relief, restitution, disgorgement, and additional relief as a resolution to Kalshi and Polymarket’s illegal operations.
Kalshi and Polymarket have not issued a response at the time of writing.
Prediction markets ceding ground
Maryland Lottery and Gaming Control Commission secretary John Martin last December issued a memo that warned licensed gaming operators about entering the prediction markets arms race, suggesting that they could have their licenses revoked.
Recent prediction market news has swung in the favor of the states, with many recent legal decisions favoring local jurisdictions. That includes key outcomes in New York, Wisconsin and Utah, where prediction platforms were denied injunctions that would prevent state regulators from applying gaming enforcement measures.
