Baltimore Sues Kalshi & Polymarket Over Unlicensed Sports Betting

Key Highlights

Kalshi and Polymarket’s legal battles are piling up in several states. Now, the city of Baltimore is taking action against the prediction market operators.

Baltimore Challenges Prediction Markets

On August 13, Baltimore Mayor Brandon Scott filed a lawsuit against Kalshi and Polymarket, accusing the prediction market operators of offering sports betting without the licenses required of regulated sportsbooks. The lawsuit also names Coinbase and Robinhood, among other distribution partners, as defendants. 

The city alleges that the companies are competing with licensed betting operators while avoiding requirements involving regulatory oversight, taxation, and responsible gambling protections. The lawsuit adds another challenge to prediction markets as governments scrutinize sports-related contracts offered through the platforms.

It’s also not the first time Baltimore has taken action against what it perceives to be unlawful gambling activity. In March, it filed a lawsuit against six sweepstakes casinos.

Federal & State Authority Collide

At the heart of the dispute is a larger regulatory question surrounding prediction markets. These platforms operate under a federal framework, regulated by the Commodities Futures Trading Commission (CFTC), while traditional sportsbooks must generally comply with licensing and regulatory requirements imposed by individual states. Sports betting is legal and regulated in Maryland, while Maryland online casinos are based in offshore markets.

That distinction has created growing tension as prediction markets expand their sports offerings. Baltimore’s lawsuit is another attempt by a local government to challenge whether these contracts effectively function as sports bets and should therefore face comparable regulation.

Sportsbooks Explore Prediction Markets

Prediction markets have also attracted attention from major sportsbook companies. DraftKings and FanDuel are moving toward prediction-market products as another way to reach customers, particularly in states where traditional sports betting hasn’t been legalized.

The shift comes after both companies reported disappointing second-quarter 2026 earnings, with lower sportsbook revenue contributing to the results. Prediction markets can operate across all 50 states and generally have a minimum participation age of 18, expanding their potential customer base beyond the traditional sportsbook model.

With prediction markets continuing to grow, legal disputes over who has authority to regulate sports contracts will continue to play a major role in determining how the sector develops. On July 31, New York sued Kalshi, claiming it was operating an illegal, unlicensed gambling business. Prediction markets have faced similar legal challenges in Minnesota, Nevada, and Washington.