Baltimore Targets Prediction Markets: Robinhood, Coinbase, and Webull in Legal Battle

The City of Baltimore has filed lawsuits against prediction market platforms Kalshi and Polymarket, alleging they violated Maryland's gambling laws. Mayor Brendan Scott accused the companies of operating 'illegal, unlicensed sports-betting platforms' and misleading users about the 'legality and regulatory status of their products.' The lawsuits claim that the companies' characterization of event contracts amounts to unlawful wagers under state laws. Scott stated, 'These companies are running sportsbooks without licenses and betting that a new label will put them above the law,' adding that 'Baltimore will not allow multibillion-dollar companies to prioritize profits over people and harm communities through illegal gambling.' The complaint against Kalshi also names Robinhood, Webull, and Coinbase as partners, accusing them of deceptive practices by marketing sports contracts as 'lawfully purchasable and tradable in Maryland.' This legal action is the latest conflict between U.S. state and federal authorities, with experts expecting it to escalate to the Supreme Court. The U.S. Commodity Futures Trading Commission (CFTC), under Chair Michael Selig, argues that event contracts on prediction markets qualify as 'swaps' within its jurisdiction, while Baltimore and other state authorities dispute this claim. A Polymarket spokesperson told Cointelegraph that 'city-specific action runs counter to the CFTC's established framework for regulating prediction markets,' emphasizing that 'as courts have recognized, prediction markets on CFTC-registered exchanges are governed by federal law, not a patchwork of state and local rules.' This development reflects ongoing tensions in the U.S.'s crypto regulatory landscape.

Markets are closely watching how this case will unfold. Baltimore's action could signal a new era in the regulation of prediction markets, with such platforms potentially facing more frequent scrutiny. The companies' alleged deceptive practices also highlight broader transparency issues within the crypto industry.