Baltimore City is suing prediction-market companies Kalshi and Polymarket, accusing them of using a legal loophole to offer sports betting in Maryland without complying with state gambling laws.

The lawsuit asks a judge to stop the companies from accepting transactions from city residents and to order civil penalties, restitution for customers and the return of profits earned through the alleged violations.

The complaint alleges the companies offer transactions that function like sportsbook wagers but label them “event contracts” and “prediction market trades.”

“These companies are running sportsbooks without licenses and betting that a new label will put them above the law,” Mayor Brandon Scott said. “It won’t. Baltimore will not let multibillion-dollar companies put profits over people and harm our communities through illegal gambling.”

Polymarket disputed the city’s authority to regulate it.

“City-specific action runs counter to the CFTC’s established framework for regulating prediction markets,” a Polymarket spokesperson said. “As courts have recognized, prediction markets on CFTC-registered exchanges are governed by federal law, not a patchwork of state and local rules.”

Kalshi also disputed the city’s claims, saying it is federally regulated and complies with consumer protection laws.

“People use regulated prediction markets like Robinhood, Kalshi and CME because they’re neutral, fair and transparent marketplaces,” the spokesperson said. “Kalshi spent years getting regulated by the federal government and abides by all applicable regulations, including consumer protection laws. If the Mayor has genuine concerns about guardrails, we’re always happy to chat. In the meantime, we will defend these claims in court.”

Who regulates prediction markets?

Baltimore’s lawsuits come as a federal appeals court is considering whether Maryland can regulate prediction markets, putting the state at the center of a growing national fight over who has authority over the platforms.

In 2025, Kalshi sued Maryland after state gambling regulators ordered it to stop offering sports-related event contracts, calling them unlicensed sports betting. Maryland has argued that the contracts are gambling and therefore subject to state law.

A federal judge ruled against Kalshi later that year, declining to block Maryland’s enforcement action. Kalshi appealed the decision, and the case is now before the 4th U.S. Circuit Court of Appeals. The court heard arguments in May but had not ruled as of Aug. 13.

The legal battle comes as prediction markets have rapidly expanded into sports. Fortune and Gambling Capital estimate that prediction markets accounted for about 27% of legal U.S. sports-betting volume during the World Cup.

How the platforms work

Kalshi and Polymarket became prominent in 2024 by allowing users to trade contracts tied to the outcomes of real-life events, including presidential elections, sports games, award shows and live television. Markets have included questions about how many people will be deported during the Trump presidency and what words a sports announcer will say during a broadcast.

The companies distinguish themselves from sportsbooks such as DraftKings and FanDuel by describing their platforms as exchanges where users trade event contracts with one another rather than bet against the house.

Baltimore’s Law Department disputes that distinction.

The city’s complaint says Polymarket has an in-house market-making operation that can take positions opposite customers and profit from price movements. The Law Department said in the complaint that Polymarket therefore “functions much like a traditional sportsbook, where users effectively trade against the house rather than other bettors.”

Instead of generating income from customers’ losing bets, Kalshi and Polymarket collect transaction fees. Both operate under federal regulatory frameworks, but Baltimore officials argue that federal oversight does not shield their sports contracts from Maryland’s gambling laws.

That distinction has practical consequences for Maryland customers. Licensed sportsbooks and sports gambling platforms are restricted to people 21 and older in the state, while Kalshi and Polymarket allow people 18 and older to use their platforms.

City claims local ordinances were violated

Baltimore’s Law Department alleges the companies also violated the Baltimore Consumer Protection Ordinance by making gambling easily accessible while providing misleading information about how their wagers work.

“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,” City Solicitor Ebony Thompson said. “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.”

Baltimore’s counsel argues that the companies’ lower age threshold circumvents Maryland gambling laws and could make gambling addiction more likely.

Multiple other cities and municipalities are suing Kalshi and Polymarket for similar reasons, including Arizona, Utah and New York.

Baltimore has previously sued FanDuel, DraftKings, Stake.us and Chumba Casino over alleged deceptive marketing and gambling-related harm.

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