A newly filed amicus brief in Kalshi’s ongoing legal fight with Maryland is adding fuel to a growing debate about who should regulate sports-related prediction markets, federal commodities regulators or state gambling authorities.
In a filing sent to the U.S. Court of Appeals for the Fourth Circuit, Todd Phillips, an assistant professor of legal studies at Georgia State University, argues that many of the sports-related contracts offered by KalshiEx LLC are “unlikely to be commodity derivatives.” Because of that, he says they wouldn’t fall under the “exclusive jurisdiction” of the Commodity Futures Trading Commission (CFTC). If courts ultimately agree with that view, Phillips contends, Maryland’s gaming laws would not be preempted.
I just filed an amicus brief in Kalshi’s lawsuit against Maryland, arguing that the sports-related contracts Kalshi lists are unlikely to be commodity derivatives, such that the CFTC does not have “exclusive jurisdiction” over them and Maryland’s gaming laws are not preempted. 1/ pic.twitter.com/flARj6aqHx
— Todd Phillips (@tphillips) December 22, 2025
Maryland amicus brief against Kalshi filing claims sport events are not commodities
“I just filed an amicus brief in Kalshi’s lawsuit against Maryland, arguing that the sports-related contracts Kalshi lists are unlikely to be commodity derivatives, such that the CFTC does not have ‘exclusive jurisdiction’ over them and Maryland’s gaming laws are not preempted,” Phillips wrote in a series of posts on X announcing the filing.
The brief lays out what Phillips describes as three core arguments. First, he says Congress enacted the Commodity Exchange Act (CEA) to regulate financial instruments designed to hedge economic risk.
As summarized in his post, “No financial risk, no derivative. No derivative, no federal preemption.” The brief similarly states that Congress intended the CEA to apply to “commodity derivative contracts that reasonably can be expected to be used for hedging on more than an occasional basis,” and not to contracts lacking meaningful economic consequences .
Second, Phillips argues that sports events generally do not qualify as commodities because they are not tied to the kind of financial or commercial consequences that would make contracts useful for hedging. He points to examples of contracts offered on Kalshi’s platform, including wagers tied to in-game commentary. “Kalshi offers a contract about whether an announcer says ‘what a catch’ during a broadcast,” he wrote. “There is no way this contract can be used to hedge.”
In the brief, Phillips underlines that this position is consistent with Kalshi’s own prior statements. He quotes Kalshi’s filing before the US Court of Appeals for the D.C. Circuit, in which the company stated that “contracts relating to games—again, activities conducted for diversion or amusement—are unlikely to serve any ‘commercial or hedging interest.’”
Third, Phillips argues that it is ultimately up to the courts, not regulators or exchanges, to decide whether a contract qualifies as a commodity derivative. “Just because Kalshi has self-certified that a contract is a derivative, or even if the CFTC agrees that a contract is a derivative, doesn’t mean it is,” he wrote. “Courts decide.”
Maryland warns against prediction markets
The filing comes as state regulators are taking a closer look at prediction markets. In November, Maryland became the latest state to warn licensees about offering these products, joining a growing number of jurisdictions questioning whether they amount to illegal gambling. Under Maryland law, online gaming, mobile sports wagering, and online fantasy sports competitions are allowed only when they are offered by operators licensed by the state.
Earlier, on August 13, a filing in the US District Court for the District of Maryland noted that Kalshi had received written assurances from the Maryland Lottery and Gaming that the agency would not enforce state gambling laws against the company while its appeal is still pending. In correspondence cited in the case, the regulator stated that its “decision is the final determination of whether gaming is operated legally in the state.”
Phillips’s brief doesn’t take a position on whether the CEA ultimately overrides state gaming laws. Instead, it argues that preemption can happen only if a court first determines that the contracts in question are commodity derivatives that fall within the exclusive jurisdiction of the Commodity Futures Trading Commission. If they are not, the brief concludes, “state law is certainly not preempted.” The appeal remains pending at the time of writing.
Featured image: Kalshi / Canva
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