Baltimore Files Lawsuits Against Kalshi and Polymarket for Illegally Operating Sports Betting
Baltimore is taking legal action against Kalshi and Polymarket, claiming that these prediction-market operators are functioning like illegal sportsbooks while portraying their services as legitimate financial contracts. The lawsuits were filed separately by Mayor Brandon M. Scott and the Baltimore City Council in the Baltimore City Circuit Court. This action is a significant step towards addressing the growing trend of online betting platforms that blur the lines between traditional gambling and other financial services.
Unlicensed Wagering Allegations Against Polymarket and Kalshi
The legal challenges specifically target how both platforms operate. The Kalshi complaint emphasizes that the site enables wagers on game outcomes and in-game events, which aligns it more closely with traditional sports betting rather than serving as an alternate financial instrument. In other words, it isn't just about trading contracts; it's about betting on outcomes in a way that many would recognize as gambling. Similarly, the Polymarket lawsuit highlights that customers can engage in a variety of betting practices, which Maryland law classifies as illegal without proper state licensing. The crux of the issue hinges on the characterization of their operations—if these platforms were truly financial markets, they would be subject to a different regulatory framework.
Moreover, the lawsuits raise concerns about the exposure these companies create for their users. Polymarket, for instance, is accused of allowing everyday traders to compete against sophisticated participants who leverage advanced analytics and proprietary data, leading to potential insider-trading violations. It’s not just a matter of fairness; it’s about the very fabric of how financial markets are supposed to function. It’s noted that the top 0.04% of Polymarket users earn over 70% of the profits, which raises questions about fairness and transparency. Such significant disparities hint at a marketplace that rewards the well-informed while leaving average users at a disadvantage, further muddying the waters on whether these platforms can truly be classified as legitimate financial instruments.
In the Kalshi case, city officials pointed out that a significant majority of users lose money, with the platform itself acknowledging that the losers outnumber successful bettors nearly three to one. Such disclosures cast doubt on the legitimacy of their operations in a tightly regulated market like Maryland. These statistics aren't just numbers; they reflect real financial pain for individuals, challenging the narrative that these are safe and fair platforms for financial transactions.
State Agency Stances and Broader Implications
These lawsuits come on the heels of warnings from the Maryland Lottery and Gaming Control Agency, which had already sent a cease-and-desist letter to Kalshi in April 2025, asserting that buying its sports contracts is effectively akin to placing illegal wagers. By November 2025, the Maryland Lottery and Gaming Control Commission reiterated the risks involved, cautioning licensees against facilitating unlicensed prediction markets. The state's regulatory bodies are clearly drawing a line in the sand—indicating that these platforms are operating in a gray area that could have wider implications for online gambling laws across the country.
"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," stated City Solicitor Ebony M. Thompson. The city aims to use its consumer protection powers to curb what it sees as deceptive and unlawful practices. This is more significant than it looks on the surface. Local governments are increasingly recognizing the need to adapt to new forms of money-making schemes that can exploit existing legal gaps.
Adam Levitt, Founding Partner of DiCello Levitt, further remarked on the broader implications: "Allowing prediction market companies to evade gambling laws would set a dangerous precedent far beyond Baltimore." He emphasized that these firms should not be allowed to exploit new terminologies and technologies to operate outside established consumer protections. This sentiment is echoed by many legal experts who see the potential for similar challenges in other jurisdictions that are considering the regulation of online betting and gaming markets.
Baltimore is seeking civil penalties, restitution, and injunctions to halt unauthorized sports betting activities linked to these platforms. Specifically, in the case against Kalshi, the city is looking for up to $1,000 for each ordinance violation, escalating with the duration of each infraction. It’s a clear message that the city won't stand by as firms operate outside the law, and it underscores broader anxieties regarding the exploitation of legal loopholes in an increasingly digital age.
Future Outlook and Significance
The rising tension between state regulations and online platforms will likely continue, especially as digital betting markets evolve. If you're working in this space, it’s essential to pay attention to how local governments react to perceived threats to consumer protection. This incident in Baltimore may catalyze more rigorous scrutiny of similar platforms nationwide. Expect other cities and states to evaluate their own legal frameworks in response, especially those with established gambling markets.
The pushback against Kalshi and Polymarket highlights a pivotal moment for the industry. Regulatory bodies are becoming increasingly vigilant against platforms that operate in ambiguous legal areas. The consequences of this legal battle could extend beyond Maryland, setting precedence in how digital betting markets are regulated across the U.S. That said, the outcome will also test the limits of consumer protection laws and raise questions about the future of online betting. Can innovation exist within established frameworks, or will attempts to redefine gambling lead to greater regulatory backlash?
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