The state of Maryland contended in its most recent judicial brief against the prediction market that Congress specifically outlined the circumstances in which the federal Commodity Exchange Act (CEA) supersedes state law and eliminated any category that would apply to Kalshi.
Late on Monday night, Maryland filed a response brief in its U.S. complaint in the Fourth Circuit Court of Appeals. It addressed several of the arguments Kalshi had raised in its appeal following the prediction market’s unsuccessful attempt to obtain an injunction to prevent Maryland from terminating its contracts for sporting events.
Preemption—the issue of whether federal law takes precedence over state law—was a major topic of discussion in the response brief. Kalshi contends that state gambling laws are irrelevant since the federal CEA grants the Commodity Futures Trading Commission (CFTC) “exclusive jurisdiction” over contracts traded on CFTC-registered exchanges. Maryland contends that the CEA’s preemption of state laws would only cover laws pertaining to commodity exchanges and would not extend to casino regulations.
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In the Maryland instance, preemption has been particularly important. In August, Kalshi was denied an injunction in district court when Judge Adam Abelson ruled that state gambling statutes were not superseded by federal commodities law.
In contrast, Kalshi’s initial injunction in Nevada was dissolved last month. In that instance, the judge instead concentrated on the debate over whether Kalshi’s sports contracts qualified as swaps; ultimately, he concluded that they did not, therefore preemption issues were moot.
Maryland’s arguments thus centered on the question of whether state gambling regulations were preempted.
Congress made preemption clear, according to Maryland.
“Kalshi is the type of creative entity Congress had in mind” when it sought to prevent commodity exchanges from being used to promote gambling, according to Maryland’s attorneys.
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