Baltimore Sues Prediction Market Operators Over Unlicensed Sports Betting Claims

Baltimore's Mayor Brandon Scott and City Council filed lawsuits Thursday against prediction market operators Kalshi and Polymarket, marking an escalation in the regulatory disputes these platforms face across U.S. jurisdictions. The city alleges that both companies violated Baltimore's Consumer Protection Ordinance by operating illegal, unlicensed sports-betting platforms and misleading consumers about the legality and regulatory status of their products.

According to the mayor's office, Kalshi and Polymarket provide betting options functionally identical to traditional sportsbooks, including wagers on game winners, point spreads, and player statistics. The companies label these offerings as "event contracts" or "prediction-market trades," a nomenclature distinction the city contends allows them to circumvent the regulatory oversight, tax obligations, responsible-gambling requirements, and consumer protections imposed on licensed sportsbooks. Mayor Scott stated that Baltimore would not permit multibillion-dollar companies to prioritize profits over community welfare through unlicensed gambling operations.

This action is not Baltimore's first major gambling enforcement initiative this year. In March, the city filed a separate lawsuit against six sweepstakes casinos for offering casino-style games despite Maryland's prohibition on online casino gambling, demonstrating a broader municipal push against unregulated gaming operators.

Both defendants responded swiftly to the allegations. Kalshi characterized the lawsuit as political theater and claimed it attempts to relitigate a case currently under appeal before the Fourth Circuit. The company asserted it operates lawfully under exclusive federal jurisdiction and has not violated consumer protection statutes. Polymarket countered that municipal action conflicts with the Commodity Futures Trading Commission (CFTC)'s regulatory framework for prediction markets, arguing that CFTC-registered exchanges are subject to federal law rather than a patchwork of state and local regulations. Courts have previously recognized this federal preemption argument, Polymarket noted.

The dispute reflects an ongoing tension in the prediction market sector. These platforms have argued their business model differs fundamentally from traditional sportsbooks because they operate peer-to-peer exchanges where users set odds rather than houses establishing lines. However, regulators and enforcement officials increasingly view this distinction as semantic rather than substantive, particularly when the user experience and risk profile mirror conventional sports betting.

Interestingly, both companies reported flagging 140 suspicious transactions potentially linked to insider trading so far this year, suggesting they maintain internal compliance infrastructure even as they dispute external regulatory authority. This operational reality underscores the complexity of the prediction market debate: platforms operate compliance functions while simultaneously contesting whether those functions should be mandated by state and local authorities.

The Baltimore litigation adds to a growing list of jurisdictional conflicts surrounding prediction markets. Multiple states and cities have initiated enforcement action, creating precisely the regulatory fragmentation that Polymarket claims to oppose. Whether courts ultimately side with federal preemption arguments or permit local enforcement will significantly shape the future accessibility and operational scope of prediction markets across the United States. The outcome carries implications for how emerging financial derivatives platforms will be regulated as they expand into mainstream consumer markets.