Baltimore has sued Kalshi and Polymarket over alleged unlicensed sports betting, with its case against Kalshi also naming Coinbase, Robinhood and Webull over their role in distributing sports event contracts.
- Baltimore has sued Kalshi and Polymarket over alleged unlicensed sports betting.
- The Kalshi lawsuit also names Coinbase, Robinhood and Webull over their distribution of sports event contracts.
- Baltimore alleges the platforms offer sportsbook style markets without required state licenses and consumer protections.
- The city is seeking penalties, customer restitution and an order blocking unauthorized sports betting.
According to complaints filed Thursday by Mayor Brandon Scott and the Baltimore City Council in Baltimore City Circuit Court, the prediction market operators allegedly violated the city’s Consumer Protection Ordinance by making sports contracts available without the licenses required for sports wagering.
Baltimore says prediction markets operate like sportsbooks
At issue are contracts tied to sporting events that Baltimore says function in much the same way as bets sold by licensed sportsbooks. The city’s complaints cite markets covering game winners, point spreads and individual player performances.
Baltimore alleges that Kalshi and Polymarket have offered these products while avoiding state licensing requirements, taxes and consumer safeguards imposed on regulated sports betting companies.
“These companies are running sportsbooks without licenses and betting that a new label will put them above the law,” Scott said. “It won’t.”
The dispute adds Baltimore to a series of state and local challenges over whether sports event contracts fall exclusively under federal derivatives rules or can also be regulated under state gambling laws.
A similar case emerged in Kentucky in June, when state Attorney General Russell Coleman sued Kalshi and Polymarket over sports event contracts. The complaint also named Coinbase, Robinhood and Webull and alleged that users could trade products tied to game winners, point spreads and player statistics without a Kentucky gaming license.
The Commodity Futures Trading Commission later challenged Kentucky’s action, arguing that Kalshi and Polymarket operate federally regulated designated contract markets and that Coinbase, Robinhood and Webull are registered futures commission merchants permitted to facilitate event contracts through regulated exchanges.
Kalshi lawsuit also targets its distribution partners
Baltimore’s Kalshi complaint extends beyond Kalshi Inc. and KalshiEX LLC to Robinhood Markets, Robinhood Derivatives, Webull Corporation, Webull Financial and Coinbase Financial Markets.
The city alleges that the three trading platforms distribute Kalshi’s event contracts through their own prediction market products, allowing customers to access sports markets directly from the Coinbase, Robinhood and Webull apps.
Similar distribution arrangements have previously come under scrutiny elsewhere. An April Wisconsin lawsuit targeted Kalshi, Polymarket and Crypto.com alongside Coinbase and Robinhood, alleging that event contracts tied to sporting outcomes constituted unlicensed gambling.
Court filings in that dispute described how Robinhood customers place orders through the brokerage’s interface while trades are executed on Kalshi’s exchange. Coinbase also gives customers access to Kalshi-listed contracts through its own platform, according to the Wisconsin complaint.
Baltimore has brought eight counts alleging deceptive and unfair trade practices against the platforms named in the Kalshi case. The city also takes issue with “combos,” arguing that products offered by Kalshi and Robinhood operate in a manner comparable to parlays sold by sportsbooks.
Kalshi rejected the city’s characterization of its business and said its federal regulatory status allows it to offer the contracts.
“People use regulated prediction markets like Robinhood, Kalshi and CME because they’re neutral, fair and transparent marketplaces,” a Kalshi spokesperson told crypto media.
The spokesperson said Kalshi had spent years obtaining federal regulation and complies with applicable rules, including consumer protection requirements.
“If the Mayor has genuine concerns about guardrails, we’re always happy to chat,” the spokesperson added. “In the meantime, we will defend these claims in court.”
Kalshi’s position rests on a legal argument that has become central to disputes with states: contracts traded on its CFTC-regulated exchange are financial derivatives subject to federal oversight, while state authorities have repeatedly argued that sports contracts can still fall under their gambling laws.
The courts have not applied that argument consistently. In July, a federal judge rejected Kalshi’s request for a preliminary injunction against New York, allowing the state’s gambling-law case to proceed to the motion-to-dismiss stage.
Earlier, the CFTC had backed Kalshi’s position in an Ohio appeal, arguing that federal law gives the agency authority over contracts traded on federally regulated prediction markets.
Polymarket faces separate market-making allegations
Baltimore filed a separate complaint against QCX LLC, Blockratize Inc. and QC Tech LLC, which the city collectively identifies as Polymarket.
Along with the licensing allegations, the city claims Polymarket has blurred the distinction between a prediction market and a conventional sportsbook through its internal market-making operation.
According to the complaint, Polymarket’s internal market-making team can take positions opposite users. Baltimore argues that such activity means customers may sometimes be trading against the house instead of exclusively trading contracts with other market participants.
The city also alleges that Polymarket’s marketing gives consumers a misleading impression that its sports offerings are lawful and properly regulated.
“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.
Regulatory disputes have continued as trading activity on the two platforms has increased. In June, sports demand during the FIFA World Cup helped push Kalshi’s weekly trading volume to a record $5.1 billion, while sports-related contracts had become the platform’s largest product category. crypto.news reported at the time that the company had also deployed an internal AI system to help evaluate potential new markets.
Robinhood has also benefited from increased prediction market use. Bernstein estimated in June that the brokerage could generate $586 million in prediction market revenue during 2026, compared with $150 million in 2025, as World Cup activity drove daily market volumes as high as $4.8 billion.
Baltimore seeks penalties and an order blocking sports contracts
Through the two lawsuits, Baltimore is asking the court to impose maximum statutory penalties and order restitution for affected customers.
The city is also seeking disgorgement of proceeds it alleges were obtained through unlawful activity.
Beyond financial relief, Baltimore wants the court to stop Kalshi and Polymarket from offering what the complaints describe as unauthorized sports betting to residents of the city.
The requested order would also affect access through the distribution platforms named in the Kalshi complaint if the court accepts Baltimore’s argument that the sports event contracts are subject to local and state gambling requirements.
