Judge Not Buying What Kalshi Is Selling
A Maryland judge handed Kalshi it's first legal defeat in its quest to offer sports contracts, but the fight is far from over.
The Bulletin Board
THE LEDE: Maryland judge ends Kalshi’s legal winning streak.
ROUNDUP: Poker’s comeback; Coinbase plans prediction market entry; Tribal & commercial gaming revenue at record highs.
NEWS: RSI talks prediction markets, iCasinos, and poker during earnings call.
NEWS: Sports betting backlash continues, with calls for prop betting and advertising bans.
AROUND the WATERCOOLER: Guardians bid adieu to embattled pitchers and ESPN and the NFL sign a monster deal.
STRAY THOUGHTS: Phantom fouls.
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The Lede: The Ruling Kalshi Didn’t Want, But Should Have Expected
Kalshi’s legal winning streak has come to an end. Unlike courts in Nevada and New Jersey, Maryland Judge Adam Abelson denied Kalshi’s motion for a preliminary injunction — an expected outcome considering Judge Abelson’s previous comments during oral arguments back in May.
So, what led to the different rulings?
As attorney Andrew Kim noted, Judge Abelson focused on preemption and whether Congress intended for sports contracts to be included (a narrow focus), where previous courts looked at the situation more broadly, agreeing with Kalshi’s broader claim that the CFTC regulates their contracts.
As Kim noted (reported in Dustin Gouker’s Event Horizon newsletter):
“Judge Abelson leans heavily on the presumption against preemption. He rejects Kalshi's view that this is just about derivatives markets — unlike the judges in Nevada and New Jersey, Judge Abelson recognizes that the states have a significant interest here — one of historical significance — which prediction markets are trying to set aside by invoking a law that doesn't clearly displace the role of state gaming regulators.
“In other words, Judge Abelson seems to be saying, ‘I need to be absolutely sure that Congress intended to unleash the bull of DCMs and sports prediction markets into the china shop of state-regulated gaming and gambling. And I don't see that clarity in the Commodity Exchange Act.’”
As Judge Abelson said during oral arguments (h/t Daniel Wallach): "The burden of proving preemption as to this specific type of product ultimately boils down to one of congressional intent. It's possible that this is a type of product that Congress did not intend to preempt, even if it intended to preempt regulation of grain futures."
In his opinion last week, Judge Abelson wrote that it would be “highly unlikely that Congress would have overridden state gambling laws without at least some indication in the text and legislative history that it intended to do so.”
As Wallach has noted, several members of Congress raised questions about it potentially authorizing sports contracts when Dodd-Frank was being debated in 2008. And as Wallach wrote in a Forbes column in April, “When Congress wants to address sports gambling, it barges in through the front door. It doesn’t try to sneak in a comprehensive regulatory scheme through the back door, especially given its past unwavering opposition to sports gambling.”
So, what happens next?
Kalshi has filed a motion for an injunction pending appeal. According to Kim, “Kalshi is seeking an injunction pending appeal, not a stay. And that makes a difference, because an injunction ‘demands a significantly higher justification than a request for a stay.’”
Of interest was one of its arguments, which is that ring-fencing Maryland would take months and cost tens of millions of dollars, which would likely be a surprising claim to geolocation suppliers already doing just that, like GeoComply:
"Developing [geolocation] capability would, at minimum, take months and cost tens of millions of dollars. Kalshi’s only option to comply during the appeal would be to terminate trading for its 17,000-plus users in Maryland, many of whom have open investments on the platform."
As Kim explained during his appearance on the Straight to the Point Talking Shop Podcast, Differences of opinion between courts are how the issue moves forward.
For the Supreme Court to consider a case, it must have nationwide importance, which can be achieved if a disagreement arises between different courts that needs resolution.
“If you've only got one court of appeals, maybe the Third Circuit weighing in on a preliminary injunction motion, that's not going to be enough of a kerfuffle for the Supreme Court to get involved,” Kim said. “How quickly that percolates and makes its way up to the Supreme Court, will depend entirely on… how the dominoes fall. If there's enough of a conflict there to make this interesting for the Supreme Court.”
Roundup: Poker’s Comeback; Coinbase Plans Prediction Market Entry; Tribal & Commercial Gaming Revenue
National Heads-Up Poker Championship coming back after 12-year hiatus [Casino Reports]: There are some signs that Mike Mizrachi’s World Series of Poker Main Event win has rekindled interest in the game. The National Heads-Up Poker Championship (NHUPC) is returning (the last event took place in 2013). It will stream on Peacock this fall (dates TBD), and then later on PokerGO and PokerStars. The event will be sponsored by PokerStars and will use the familiar format, with a mix of celebrities and poker pros competing in a $25,000 buy-in, 64-player single-elimination bracket format with a best-of-three final.
Coinbase is ready to enter the prediction market space [Event Horizon]: The cryptocurrency exchange Coinbase told CNBC it plans on getting into the prediction market space. CEO Brian Armstrong said in the Coinbase Q2 earnings call: “Over time, we’ll bring all asset classes on-chain, including prediction markets, real-world assets, and more. And we’re building on the frontier, committed to doing this in a compliant and trusted way, which we’ve done for many years, while making it easily accessible to everyone. So that’s the Everything Exchange.” As Dustin Gouker noted in his Event Horizon newsletter, “Coinbase does have its own designated contract market via the Commodity Futures Trading Commission.”
Tribal gaming revenue hits an all-time high of $44 billion [CDC Gaming Reports]: Tribal gaming revenue continues to grow, as reported by CDC Gaming Reports: “The National Indian Gaming Commission on Thursday announced gaming revenue at tribal casinos of $43.9 billion for fiscal year 2024 – an historic figure that reflects 4.6%, or a $2 billion, increase over $41.9 billion in 2023. With the exception of the pandemic during the 2020 fiscal year, tribal gaming revenue has risen every year since 2010 in the aftermath of the Great Recession.”
Commercial casino gaming surging, but trouble is on the horizon [Earnings+More]: Commercial gaming had a record-setting 2024, posting a combined (sports betting, online, and casinos) revenue tally of $72.04 billion. But it’s not all sunshine. The Las Vegas Convention and Visitors Authority reported visitation to Las Vegas was down 11.3% in June, the sixth straight month of year-over-year decline. Individual operators’ earnings calls are also pointing to trouble on the horizon, as reported by Earnings+More: “MGM Resorts and Caesars Entertainment both indicated the Las Vegas Strip is entering a summer downturn, which will represent the first reversal of fortunes since the end of the pandemic.”
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News: RSI Talks Prediction Markets, iCasinos, and Poker
The big takeaway from Rush Street Interactive’s earnings call was its ninth consecutive quarter of growth, which sent share prices surging 15%. “Online casino revenue grew 25% during the quarter, while online sports betting grew 15% compared to the same period last year,” CEO Richard Schwartz said. “This strong momentum reflects the effectiveness of our focus on markets where we can deploy our full suite of gaming offerings and maximize player value.”
Of more interest to my readers were Schwartz’s comments on prediction markets.
Schwartz said that as a casino-first company, prediction markets don’t have the same risks to RSI’s business as they might for other competitors.
“We're monitoring very closely, like everybody else, in the sector. There are a lot of moving parts… but at the end of the day, we are a casino-first company, so we don't see the same risks to our existing business as others do.
“Clearly, when you're offering products that are both sports-related in similar ways and you have your state regulators in lawsuits against the federal approach, it's a very delicate situation, a balance between retaining your existing sportsbook infrastructure at a state level and perhaps having a national approach through a prediction market approach.”
Schwartz went on to say that if prediction markets gain hold and start eroding tax dollars from states, there is a “very real possibility” it will accelerate the legalization of iCasino: “I think it could work out well for us ultimately in the sense that our top priority is legalizing more additional iCasino states and opportunities for online casino legalization.”
Schwartz also touted the company’s recent expansion of its US online poker product:
“We recently launched multistate poker with shared player pooling across markets. In a short period, we went from no presence in the poker space to establishing BetRivers as a high-quality competitor across four states, and we are very proud of our team and what they've accomplished.”
“The product and operations are thoughtfully designed to deliver a great user experience while serving as a valuable amenity that supports cross-sell and engagement to our casino and sportsbook offerings. Our platform features unique functionality that encourages fluid cross-play, enabling our poker customers to play casino games and bet on sports without leaving the poker table.”
News: Sports Betting Backlash Continues
As STTP has noted, whether or not the legal market is responsible for uncovering betting scandals that previously went undetected doesn’t matter. The backlash to sports betting integrity scandals is real and is gaining steam.
Ohio Gov. Mike DeWine has been on a personal crusade against the sports betting industry, having doubled the sports betting tax rate in 2023 and trying again (but failing) in 2025. Now he is suggesting that the state should ban all prop bets in the wake of the betting integrity investigations around two Cleveland Guardians pitchers and ongoing threats to athletes — Ohio banned prop bets on college athletes in 2024.
In a press release issued last week:
“Ohio Governor Mike DeWine today called on the Ohio Casino Control Commission (OCCC) to remove prop bets from the list of legal bets that can be placed under Ohio's contractual rules for operators.”
“The evidence that prop betting is harming athletics in Ohio is reaching critical mass. First, there were threats on Ohio athletes, and now two high-profile Ohio professional athletes have been suspended by Major League Baseball as part of a ‘sports betting investigation.’
“The harm to athletes and the integrity of the game is clear, and the benefits are not worth the harm. The prop betting experiment in this country has failed badly. I call on the Casino Control Commission to correct this problem and remove all prop bets from the Ohio marketplace.”
The Ohio Casino Control Commission is ‘gathering information’ on the request, a spokesperson told Sports Betting Dime:
“The Ohio Casino Control Commission (the “Commission”) works closely with Governor DeWine’s Office and General Assembly in serving the citizens of Ohio and protecting the integrity of gaming in the State. To that end, staff is gathering information for the Commission to consider. The Commission will announce its next steps in the upcoming days.”
Dustin Gouker did a good job laying out the case against a prop betting ban in his Closing Line newsletter — I would add that these arguments are sound and logical, but don’t seem to be resonating.
In other news, per CDC Gaming Reports, the National Consumers League, a private, nonprofit advocacy organization in the United States, recognized as America's oldest consumer advocacy group, is advocating “for a ban on sports betting advertising, especially the use of push notifications for this purpose, though the NCL is not advocating for a ban on sports betting.”
“Sports betting companies have 24/7 access to consumers through their phones, from the minute they wake up to the second they fall asleep. The use of app notifications for advertisements is an extremely invasive marketing practice that should not be normalized,” NCL Senior Public Policy Manager Eden Iscil said in a statement. “The government regulates advertising on television, email, and text messages. But when it comes to push notifications, something that’s arguably more effective than each of those older mediums, there are no protections.”
As STTP has noted, there are also efforts to prohibit credit card usage in Illinois, as well as a bill that would prohibit micro-bets (in-game betting) in New Jersey.
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Around the Watercooler
Social media conversations, rumors, and gossip.
A couple of significant developments to touch on in this section.
First, a not-so-positive development in the investigation into two Cleveland Guardians pitchers after they were flagged for unusual betting activity.
And this one is huge news, but it’s a bit sports betting adjacent. Still, it could be (the word ‘could’ is doing a lot of heavy lifting here) a game-changer for ESPN Bet:
Stray Thoughts
My feature column on Friday sparked an interesting discussion on Alun Bowden’s LinkedIn (Alun is the SVP of Strategic Insight at Eilers & Krejcik Gaming). That discussion made me think of another factor that separates NBA journeymen from the all-time greats: The all-time greats’ reputation precedes them, and they get a lot of calls.
LeBron getting the calls is like DraftKings and FanDuel getting favorable policies included in legislation. Whether it’s market access (untethered licenses) or reciprocal licensing, there are benefits to having scale and resources. That has translated into "calls" that favor their business model, much like a star player's reputation sways referees. Smaller operators often face higher hurdles in influencing similar outcomes.
Of course, sometimes, like with Illinois’ taxes, they don’t get the call.