A significant legal clash is unfolding in the US between state gaming regulators and a federally registered derivatives exchange, as the Maryland Lottery and Gaming Control Commission (MLGCC) attempts to block the operations of Crypto.com | Derivatives North America (CDNA).
The case, filed in the District Court of Maryland, mirrors a growing trend of state-level challenges to the legality of event contracts, a form of financial product traded on platforms overseen by the Commodity Futures Trading Commission (CFTC).
At the heart of the dispute is CDNA’s offering of sports event contracts, financial derivatives whose returns are tied to the outcomes of live sporting events. Notably, CDNA and similar entities only began offering these contracts in January.
The Maryland regulators claim that CDNA’s offerings amount to illegal sports wagering under state law, requiring the company to obtain a state license.
However, CDNA argues that it operates as a CFTC-regulated Designated Contract Market (DCM), and that federal law preempts state regulation of these products.
“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 on April 22.
“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.”
CDNA is not alone in its legal battle.
KalshiEX, has been similarly targeted by state gaming authorities in Nevada, New Jersey, and elsewhere, who have also asserted jurisdiction over event contracts, despite these products being federally regulated.
KalshiEx expanded its portfolio to include sports-focused contracts, complementing its existing markets that cover political and current event predictions. In addition to offerings on topics like the potential elimination of the Department of Education, customers can now place bets on sporting outcomes such as the 2025 US Open Golf Championships and the NBA championship.
In a ruling that could have implications for CDNA, a federal court in Nevada recently granted an injunction preventing Nevada state regulators from enforcing state gaming laws against KalshiEX. A similar ruling followed in New Jersey, where a federal judge temporarily barred state enforcement actions while determining whether Kalshi’s event contracts fall under federal, rather than state, jurisdiction.
What does the regulatory landscape look like?
Event contracts, which allow participants to speculate on outcomes such as the winner of a sporting event or economic indices, are considered derivatives under US financial law. As such, their trading is regulated by the CFTC, a federal agency tasked with ensuring the integrity of the national derivatives market.
In 1974, the Commodity Exchange Act (CEA) granted the CFTC exclusive jurisdiction over federally registered markets, explicitly preempting state involvement in regulating the trading of derivatives.
Despite this clear federal mandate, state authorities, including the MLGCC, have raised concerns about whether these financial instruments constitute gambling under state law, arguing that Maryland’s laws on sports wagering should govern the activity.
The MLGCC’s cease-and-desist order to CDNA in early April 2025 demanded the company halt its offerings, warning of potential civil and criminal penalties.
CDNA, in turn, argues that its operations fall squarely within the CFTC’s domain and are therefore immune from state regulation. The company maintains that it has followed all required procedures for listing its products in compliance with federal law, including submitting product certifications to the CFTC.
Furthermore, CDNA contends that the Maryland regulators have failed to recognise the CFTC’s authority, and their actions pose an immediate threat to the company’s business operations.
Is there a precedent?
The case against CDNA is part of a broader pattern seen in KalshiEX’s ongoing litigation with state regulators.
In two of these cases, courts have issued preliminary injunctions, allowing KalshiEX to continue its operations while the legal proceedings unfold.
“Nevada’s attempt to regulate Kalshi intrudes upon the federal regulatory framework that Congress established for regulating futures derivatives on designated exchanges,” the company said in its lawsuit.
These rulings have underscored the CFTC’s exclusive regulatory power over federally regulated markets, reinforcing the view that state laws cannot override federal authority in the case of registered derivative exchanges.
In Nevada, for example, a federal court’s decision in April 2025 stated that state laws regulating sports betting cannot apply to CFTC-regulated entities like KalshiEX. This ruling emphasised that even if event contracts are seen as involving “gaming,” the federal regulatory framework governs the market.
The case highlighted the potential chaos that would arise from a fragmented system where each state could impose conflicting regulations on national exchanges, a concern shared by many in the industry.
The litigation spillover
As companies like CDNA and KalshiEX operate nationally, they rely on a uniform regulatory framework that allows them to provide services to customers in multiple states without being subject to a patchwork of state laws.
If Maryland or other states were to assert their authority over these markets, it could lead to conflicts in payments processing and compliance issues for businesses that rely on platforms offering such financial products.
For example, payments providers would be required to navigate the complex regulatory landscape, ensuring that they comply with both state and federal laws, which could introduce significant operational costs and complexities.
Moreover, as the legal framework for digital financial products continues to evolve, the outcome of this case could provide clarity on the regulatory oversight of innovative financial markets, particularly those offering event-based contracts that could be perceived as forms of gambling.
