Baltimore Sues Kalshi and Polymarket for Unlicensed Sports Betting — First Municipal Lawsuit Against Prediction Markets
The City of Baltimore has filed the first municipal-level lawsuit against prediction market platforms, alleging Kalshi and Polymarket operate unlicensed sports betting that avoids Maryland's 15% gaming tax, state oversight, and responsible-gambling rules including the 21+ age requirement. The suit coincides with weak sportsbook earnings at DraftKings and FanDuel and their public pivot toward prediction markets.
The City of Baltimore has sued Kalshi and Polymarket, becoming the first municipality in the United States to file legal action against prediction market platforms. The complaint, reported August 13, alleges the platforms operate unlicensed sports betting that 'compete with regulated sportsbooks while avoiding the oversight, taxation, responsible-gambling requirements' Maryland imposes on licensed operators. Maryland has a licensed sports betting framework with at least 11 operators paying a 15% state tax on gross gaming revenue. Kalshi and Polymarket operate under CFTC designated contract market licences and pay no Maryland gaming tax.
For UK readers, the responsible-gambling dimension of Baltimore's suit is the most directly relevant element. Maryland's licensed sportsbook operators are required to participate in self-exclusion programmes, provide problem gambling helpline referrals, and restrict advertising — requirements broadly comparable to those imposed by the UK Gambling Commission on licensed operators. Kalshi and Polymarket, as CFTC-regulated commodity exchanges, operate under no equivalent federal responsible-gambling mandate. The age gap is the sharpest version of this: Maryland sports betting requires customers to be 21+, while prediction market accounts are available to anyone 18 or older. An 18-year-old in Baltimore can open a Kalshi account and trade NFL game outcome contracts that a licensed Maryland sportsbook would reject. UK Gambling Commission Age Verification guidance requires stricter controls precisely because vulnerable young adults are a documented high-risk cohort. Baltimore's complaint frames the age gap as a harm, not merely a regulatory inconsistency.
The municipal filing is structurally novel in a litigation landscape that has been dominated by state-level action. Eleven states have filed or been party to suits involving prediction market regulation since early 2026 — all at state attorney general or regulatory agency level. Baltimore's independent suit raises the question of whether the city has standing that the state lacks: a licensed retail sportsbook presence in the city, a direct tax revenue loss from prediction market activity, and a municipal responsible-gambling obligation to city residents. Maryland itself has not sued the platforms. Whether a US federal court accepts that a city has independent standing to enforce what amounts to a state regulatory framework against federally-licensed entities is a threshold legal question. If it does, it opens a second wave of municipal litigation in every US city with licensed gambling venues and a demonstrable tax shortfall attributable to unlicensed competition.
The commercial backdrop for the Baltimore suit is the ongoing earnings pressure on US licensed sportsbook operators. DraftKings and FanDuel both reported weak sportsbook Q2 2026 earnings, attributing some of the softness to prediction market competition. Both companies are publicly pivoting toward their own CFTC-regulated prediction market products — FanDuel Predicts, DraftKings Predictions — explicitly as a strategy to operate in states that have not yet legalised sports betting, using federal DCM status to bypass state authorisation requirements. That pivot is the structural dynamic Baltimore's complaint targets: platforms using federal licensing to compete with state-licensed operators in states where sports betting is legal, paying no state gaming tax in the process. The Supreme Court review that commentators have been predicting since the Third Circuit / Connecticut circuit split emerged is increasingly the only mechanism that can resolve the question cleanly.
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Recent updates
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