The City of Baltimore has launched a legal challenge against prediction-market platforms Kalshi and Polymarket, accusing them of operating unlicensed sportsbooks and misleading users about the legality of their sports contracts in Maryland.

The lawsuits put the city at the center of a growing U.S. regulatory battle over prediction markets, where companies argue that sports-related event contracts are federally regulated financial products while state and local authorities increasingly contend that they are simply gambling under a different name.

Baltimore says prediction markets are sportsbooks in disguise

In complaints filed Thursday, Baltimore Mayor Brandon Scott’s office accused Kalshi and Polymarket of running what it described as “illegal, unlicensed sports-betting platforms.”

The city alleges that the platforms allow users to trade contracts tied to sports outcomes, including game winners, point spreads, totals and player-related markets. Baltimore argues that these products function no differently from conventional sports bets and therefore require authorization under Maryland gambling laws.

At the center of the city's case is the companies’ classification of these products as prediction-market “event contracts.” Baltimore argues that changing the terminology does not change the underlying activity.

“These companies are running sportsbooks without licenses and betting that a new label will put them above the law. It won’t.”

The city is seeking court orders that would prevent Kalshi and Polymarket from accepting transactions from Baltimore residents. It is also seeking civil penalties, restitution for affected customers and the disgorgement of profits allegedly generated through the practices described in the complaints.

Robinhood, Webull and Coinbase pulled into the fight

The Kalshi lawsuit extends beyond the prediction-market operator itself. Baltimore also named Robinhood, Webull and Coinbase as defendants, alleging that the companies helped market or distribute Kalshi’s sports-related contracts.

According to the complaint, the platforms helped create the impression that Maryland residents could “lawfully” purchase and trade the contracts despite Kalshi not holding a state sports-betting license.

Polymarket faces similar allegations from Baltimore, although the city's complaint against it does not name the same brokerage partners.nThe companies have rejected the city's characterization of their products, setting the stage for a much broader fight over who has the authority to regulate prediction markets.

The bigger battle: CFTC versus state gambling laws

Baltimore's lawsuits add another front to an increasingly contentious dispute between prediction-market operators, state regulators and the federal government.

The U.S. Commodity Futures Trading Commission has maintained that event contracts offered through federally registered prediction-market exchanges fall under federal commodities regulation. That position puts the CFTC's oversight framework at odds with state and local authorities that argue sports contracts should remain subject to state gambling laws.

Polymarket pushed back against Baltimore's action, arguing that prediction markets operating on CFTC-registered exchanges are governed by federal law rather than a patchwork of state and local rules.

Kalshi similarly dismissed the Baltimore lawsuits as “political theater” and maintains that it operates lawfully under federal oversight.

That disagreement could ultimately become far more consequential than Baltimore itself. If courts side with the city, prediction-market operators could face a growing patchwork of state and local restrictions on sports contracts. If federal jurisdiction prevails, states could find themselves with far less power to block products they consider gambling.

For Kalshi, Polymarket and the rapidly expanding prediction-market industry, the Baltimore lawsuits therefore represent another test of a fundamental question: Are sports prediction contracts financial products protected by federal law, or sportsbooks that states have the right to shut down?