The filing is in response to the agency’s cease-and-desist orders.

Why Crypto.com Believes CFTC Rules Preempt Maryland State Law

“The law is very clear for derivatives and prediction market event contracts, and we are proud to offer these services through a fully compliant and regulated platform,” Crypto.com Chief Legal Officer Nick Lundgren said in a statement. “Our decision to sue the Maryland Lottery and Gaming Control Commission is necessary at this time, and we are fully confident that the existing laws will be recognized and upheld in our favor.”

Maryland has called to eliminate sports-event contract trading, claiming it is an unlicensed form of sports betting. It is already one of six states to issue cease-and-desist orders against predictive market platforms, joining Illinois, Montana, Nevada, New Jersey, and Ohio. Tennessee has also expressed concerns, without going to the same length.

Crypto.com, referred to in the legal filing as “CDNA,” has detailed eight “factual allegations against the Maryland Lottery and Gaming Control Commission. These are as follows:

1. The Commodity Futures Trading Commission has exclusive jurisdiction to regulate derivatives contracts in federally registered markets.
2. Event contracts are exchange-traded financial instruments used to allocate risk.
3. The CEA and CFTC Regulations establish a comprehensive federal regulatory framework for trading in event contracts and other derivatives.
4. The CFTC’s enforcement authority over DCMs and its power to prohibit contracts contrary to the public interest.
5. CDNA is a federally regulated DCM that lists sports event contracts.
6. The Maryland Lottery and Gaming Control Commission threatened CDNA with legal action for offering sports event contracts to Maryland residents.
7. The Nevada Gaming Commission has been enjoined from enforcing its gaming laws with respect to event contracts.
8. Defendants’ threatened action will imminently and irreparably harm CDNA and interfere with its ability to conduct federally regulated activities.

Crypto.com Leans on Kalshi Nevada Ruling in Maryland

The filing repeatedly references Kalshi’s victory over the Nevada Gaming Control Board, which granted the company’s request for a temporary restraining order and preliminary injunction.

CEO Tarek Mansour has remained a fierce advocate amidst scrutiny, calling prediction markets the “quintessential truth machines” in a social media post last month.

“With trust in traditional institutions at an all-time low, people are turning to prediction markets at an astronomical pace,” Mansour wrote on X, the site formerly known as Twitter. “The growth of the ecosystem in the last year is a testament to how important they have become to the American people.”

Kalsh’s very similar lawsuit against Maryland alleged that the state’s actions could cause “irreparable harm” to its business. 

While sports betting is legally operative in only 38 states plus Washington, D.C., prediction markets — in which users can buy and sell contracts for real-world events such as the Super Bowl and March Madness — are available in all 50 states.

Crypto.com Claims State Actions ‘Without Merit’

Crypto.com defines event contracts as “exchange-traded financial instruments, known as a derivative or swap, that facilitate risk allocation to specific outcomes of underlying future events.”

In its complaint, it said that any state action “pertaining to derivative contracts traded under the jurisdiction of the (Community Futures Trading Commission)” is without merit.

As for Maryland’s stance, Lottery and Gaming Control Commission Director John Martin said, “We view this as a legal matter and a consumer protection matter, and there is also a fiscal interest for the State. Each of Maryland’s legal sports wagering operators completed a rigorous licensing process and is subject to extensive regulations that include responsible gaming requirements.”

Martin added that because companies like Kalshi, Crypto.com, and Robinhood continue to operate without proper licensing, they are avoiding the same sports wagering taxes that legal operators pay to the state. 

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Get Out of Ohio, Orders OCCC

The state regulator announced in a release that “The Commission determined the event contracts offered by the companies on sporting events meet the definition of sports gaming under the law, which requires licensure to be legally offered in Ohio.” 

Kalshi continues to grab headlines. The company announced it will sue Nevada and New Jersey gambling regulators, who have also ordered Kalshi to cease and desist. 

Tarek Mansour, Kalshi’s outspoken CEO, posted on X: “Both states have issued cease and desist orders that fundamentally misunderstand prediction markets and undermine the foundation of U.S. financial markets, which are regulated by the federal government.” 

“We are left with no choice: sue,” he closed his remarks with. 

Ohio’s stance on the matter has been made clear. Matthew Schuler, an Executive Director for the OCCC, stated: “Purchasing a contract based on which team a person thinks will win a sporting event is no different than placing a bet through a traditional sportsbook.” 

“The only difference is that these event contracts do not have the consumer protections required under Ohio law and are accessible to Ohioans under 21 years of age. The Commission must take action to fulfill its statutory responsibilities and ensure the integrity of sports gaming in Ohio.” 

The Debate Rumbles On

Something will have to give, sooner or later, in the regulatory stand-off surrounding sports events contracts. Kalshi has baited state regulators with bolshy advertising claiming to offer “legal sports betting in 50 states.” 

Despite increasing pressure from gambling industry stakeholders, the Commodity Futures Trading Commission (CFTC) has remained tight-lipped. The regulator has previously ordered Kalshi and Robinhood to stop offering sports contracts, but after Kalshi recently self-certified and began offering the equivalent of money-line betting on March Madness, there has been no noise from the Commission.

There are a few potential outcomes if the CFTC stays silent: 

1. As well as Ohio, further state regulators order sports events contract operators to cease and desist, and the next months will be dominated by legal proceedings when operators respond through the courts.
2. Large sportsbook operators launch their own prediction market verticals. DraftKings has already filed for a product called “DraftKings Predicts” after CEO Jason Robins told investors it was a space they were keeping a keen eye on.

There is mounting pressure on the CFTC to intervene as the Commission undertakes roundtables to assess the landscape. In a letter penned by an amalgamation of several notable Tribes, sports events contracts were labelled a threat to Tribal sovereignty and in breach of state-specific gaming compacts.

How Does It End?

Major League Baseball has also voiced concerns around the lack of an integrity framework. Its response to the CFTC acknowledged that the current events contract offerings “do not carry the same integrity risks as prop bets or even single-game bets.” It then added that it expected equivalent offerings to arrive soon, and they have – right on cue. 

“As the resemblance between sports event contracts and traditional sports betting markets continues to grow, so too does the need to replicate the integrity and consumer protections that exist at the state level,” the letter continued. 

Alarmingly, the MLB suggested that it had been advised that certain exchanges and brokers have the position that they are not permitted to share information with the Baseball authority under current CFTC regulations, so any potential threats to integrity could go unreported.

One thing’s clear: global sports betting news will be dominated by events contracts in the coming months. But who would dare to predict the outcome? 

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