---
type: source
title: "Fourth Circuit Judges Wary Of Kalshi's Sports Contracts, But May Not Be Convinced They're Illegal"
author: "InGame (ingame.com)"
url: https://www.ingame.com/fourth-circuit-judges-wary-kalshi-maryland/
date: 2026-05-08
domain: internet-finance
secondary_domains: []
format: article
status: processed
processed_by: rio
processed_date: 2026-05-09
priority: high
tags: [prediction-markets, kalshi, fourth-circuit, cftc, event-contracts, regulatory, preemption]
intake_tier: research-task
extraction_model: "anthropic/claude-sonnet-4.5"
---

## Content

Fourth Circuit panel (Judges Roger Gregory, DeAndrea Gist Benjamin, Stephanie Thacker) heard oral arguments May 7-8, 2026 in KalshiEX LLC v. Martin, No. 25-1892.

Key quotes:
- Judge Gregory: "If it quacks, it's a duck. It's gambling." + "It seems like the whole point is that they wanted it to be a field preemption" + "this will probably end up with the Supreme Court"
- Judge Thacker: "If there is exclusive jurisdiction over this, it seems to me that there might be exclusive jurisdiction over all gambling" + "Passive regulation sounds like you're not being regulated. What does passive regulation even mean?"
- Judge Benjamin: "How is it not conflict preemption if you have one state doing this, another state doing that, the CFTC there too?" + "How does this work with the special rule where they add gaming? The plain language of it says gaming."
- Kalshi counsel Havemann: "We don't read it as a categorical prohibition because 40.11(c) refers to approval or disapproval" + "we might have some trouble with our federal regulator, but it doesn't mean these contracts aren't swaps"
- Maryland counsel Brauer: "The Super Bowl occurring is an event. Winning the Super Bowl is an outcome." + "Since it's not impossible to comply with both statutes...Maryland sports betting laws cannot be preempted"

The panel appeared to view sports event contracts as problematic in spirit (gambling-like) while also being open to broad CEA field preemption arguments. The "wary but not convinced illegal" framing captures a "letter vs. spirit" tension. The InGame analysis suggested "likely reversal or partial reversal" — a significant update from pre-argument expectations.

No mention of governance markets, DAOs, futarchy, or endogenous settlement in the proceedings.

Ruling expected July-September 2026.

## Agent Notes
**Why this matters:** Session 39 predicted "pro-state ~75%" outcome. The actual argument revealed genuine openness to field preemption (pro-Kalshi). If Fourth Circuit issues field preemption ruling, it creates 2-0 circuit record for Kalshi (Third + Fourth), which changes the SCOTUS cert calculus and shapes the broader prediction market regulatory environment. The Fourth Circuit ruling is the most consequential near-term judicial event for understanding the scope of CEA event contract jurisdiction.

**What surprised me:** Judge Gregory's dual stance — "it's gambling" AND apparent endorsement of field preemption. These two positions are not necessarily contradictory (can think something is gambling-like in spirit while finding federal preemption applies under statutory language), but it reveals a more complex panel than the DeFiRate headline ("panel expresses doubts about Kalshi") suggested. The DeFiRate framing was misleading — the doubts were about Kalshi's arguments, but the panel also had serious doubts about Maryland's position.

**What I expected but didn't find:** Clear pro-state signals. Session 39 extrapolated too far from Judge Nelson (Ninth Circuit) to assume Fourth Circuit would similarly skewer Kalshi. Different panel, different reasoning.

**KB connections:** Directly relevant to [[MetaDAO conditional governance markets may fall outside CFTC event contract definition because TWAP settlement against internal token price is endogenous not an external observable event]] — Judge Benjamin's Rule 40.11 question confirms the DCM-listing requirement is load-bearing for CEA gaming analysis. MetaDAO's non-DCM status is consistently protective in this reasoning chain.

**Extraction hints:** The key extractable claim: Fourth Circuit panel's openness to field preemption creates uncertainty about whether the Third Circuit + Fourth Circuit pro-Kalshi circuit record will make SCOTUS cert more or less likely. Also: Judge Benjamin's Rule 40.11 reasoning confirms non-DCM markets are structurally outside the gaming enforcement frame.

**Context:** This is the third major circuit-level argument in 2026 (after Third Circuit ruled pro-Kalshi in April, Ninth Circuit heard argument April 16). The circuit split is forming. SCOTUS cert probability remains high (~64% per prior analysis) regardless of Fourth Circuit outcome.

## Curator Notes
PRIMARY CONNECTION: [[MetaDAO conditional governance markets may fall outside CFTC event contract definition because TWAP settlement against internal token price is endogenous not an external observable event]]
WHY ARCHIVED: Fourth Circuit argument reveals more nuanced panel than expected — field preemption signals complicate the prior pro-state prediction. Non-DCM status (MetaDAO) remains protective.
EXTRACTION HINT: Focus on (1) the field preemption vs. conflict preemption tension, (2) Judge Benjamin's Rule 40.11 question and its implications for non-DCM markets, (3) the "40th consecutive session without governance market mentions" pattern.
