Sports Markets Are Heating Up

Part IV: Maryland struck the match. The fuse is burning.

We're always hunting for the visual–the one image that distills a complex legal dispute into its most essential form.

That clarity is especially valuable when both parties are pushing narratives that miss the mark with statutes and/or case law. We saw it in SEC v. Coinbase as well as in Kalshi v. CFTC. And now we’re seeing it again in Maryland, in Kalshi v. Martin. This was the visual we used in Part III of this series.

The arc is familiar. A governing regime (e.g., a regulator, a state, etc.) is tethered to a prior position and can’t advance the strongest possible legal argument. Meanwhile, the counterparty pokes holes in the logic and presses the attack.

The SEC scored some wins in crypto litigation, but even those victories felt diluted. Their best argument hinged on the premise that one cannot invest in crypto, but they already took the position that one can.

The CFTC couldn’t prevail against Kalshi because the strongest argument required acknowledging that all contingent event contracts fall under its jurisdiction. And while that stance wasn’t inconsistent with prior positions, they still didn’t take it. Our best guess? They feared it would open the floodgates of regulatory workload, except that it wouldn’t have.

Now, Maryland faces the same dilemma. The best argument available is that the CFTC has preemptive authority over sports betting. But that’s a brutal concession. Unlike the SEC, which could reverse course with some humility, Maryland is boxed in. Acknowledging federal preemption would mean undermining its own state-regulated sports betting regime–which, in 2024, generated $60.3 million (Page 109 of PDF) in taxable revenue.

So, Maryland was forced to argue that federal law preempts somewhat, but not entirely. The line-drawing problem here is obvious. Yet somehow, Judge Abelson accepted the state’s framing and handed them the first round win.

Here’s our prediction: The Maryland win will not last. Judge Abelson’s decision, assuming it ultimately favors the state, will be overturned. Why?

Because his opinion misses the core issue. It allows states to encroach on federal territory where they have no real claim. The CFTC failed to act–not just on sports betting being offered on DCMs, but well before that, on state-regulated sports betting. The intervention should have come in 2022 after Maryland began allowing state-regulated sports betting. DCMs can’t offer sports betting, but neither can the states.

Once you draw the critical line–states only have jurisdiction over gambling games–the whole thing starts to unravel. We’ll dissect Judge Abelson’s opinion next. But first, let’s rewind the tape.