Kalshi is trying to kill the “duck” argument once and for all.
- A lawyer for Kalshi argued that federal commodities law gives the Commodity Futures Trading Commission sole authority over sports event contracts, even if states view them as gambling.
- One appeals court judge compared Kalshi’s contracts to a duck that “quacks” like gambling, while Kalshi’s lawyer said Congress intentionally placed such markets under federal oversight.
- Maryland maintains sports betting is a state-regulated issue and argues federal law does not override its authority to block Kalshi’s sports prediction markets.
A lawyer for the prediction market operator said Thursday that states have been in a flap about the gambling-like appearance of futures trading for years. However, he added, the fact remains that Congress handed oversight of those contracts to a federal regulator, the Commodity Futures Trading Commission (CFTC), a long time ago and didn’t leave it up to the states.
The arguments were made before a panel of judges from the U.S. Court of Appeals for the Fourth Circuit, which is hearing Kalshi’s challenge of a lower court’s decision that sided with Maryland on whether federal commodities law preempts the state’s sports betting laws.
In one case, a federal judge in Maryland denied a preliminary injunction for Kalshi, ruling that the prediction market “has failed to show a likelihood of success on the merits of its claim that the Commodity Exchange Act preempts Maryland’s gaming laws.” pic.twitter.com/aGRg2nuiWz
— Geoff Zochodne (@GeoffZochodne) August 2, 2025
The lower-court decision leaned in the direction of "no." Then, on Thursday, one of the judges on the appeals court panel, Roger Gregory, brought ducks back into the conversation.
“If it quacks, you know, it's a duck, right?” Gregory said. “It's ... basically gambling. That's what Maryland said, ‘You are gambling.’”
“They say this quacks like a duck, it looks like gambling,” agreed William Havemann, Kalshi’s lawyer. “And I think that was driving a lot of what the district court was doing, too.”
Similar rhetoric has dogged prediction markets since they began dabbling in sports event contracts in late 2024. In short, the trading of those contracts just really looks a lot like state-regulated sports betting.
Therein lies the problem, Havemann argued. In the late 19th century, states adopted gambling laws to specifically prohibit futures trading on the grounds that it “quacks like a duck,” or that it looks like gambling.
“And the decision that Congress made in 1974, and then reaffirmed in 2010, is with respect to transactions on the designated contract markets, regardless of whether a state thinks it looks like gambling, that is the CFTC’s purview,” Havemann said. “They have a whole number of tools in their tool belt to deal with questions about, you know, is this appropriate on a DCM. But it is hands-off for states.”
Time will tell if the appeals court determines that’s enough to sideline Maryland sports betting regulators from continuing to try to clamp down on Kalshi and other prediction market operators in the state.
The Maryland Lottery and Gaming Control Commission sent a cease-and-desist letter to Kalshi in April 2025, claiming the company was offering unauthorized sports wagering in the state, which prompted a lawsuit from the prediction market operator.
Them's fighting words
That the trading of sports event contracts can resemble state-regulated sports wagering is more or less the casus belli of the growing number of legal battles between prediction markets and state gambling regulators. There are now more than a dozen states involved in some kind of prediction market-related litigation.
There are a few legal questions that states and prediction market operators are trying to get answers to in their favor. First, does federal commodities law trump state gambling rules? Also, do sports-related event contracts qualify as swaps that are governed by federal law?
How the Fourth Circuit ultimately rules on the Kalshi-Maryland spat remains to be seen. But, in Maryland’s eyes, there’s no federal commodities law that is meant to soar above the state's sports wagering law.
“Sports wagering is an area of core, historic state police powers, and it requires clear and manifest Congressional intent to preempt,” Maryland Assistant Attorney General Max Brauer said during Thursday’s hearing. “But Congress had no intent to preempt state sports wagering laws when it passed (the Dodd-Frank Act) to address the 2008 financial crisis, in part, by adding swaps to the Commodity Exchange Act. Therefore, the Commodity Exchange Act does not preempt Maryland's sports wagering act.”
