REASON: A Scandal in Maryland That Reveals the Crony Capitalism in the Fight Over Prediction Markets
Public records obtained by Spotlight on Maryland show that in April 2025, the Maryland Lottery and Gaming Control Agency sent a letter to the Commodity Futures Trading Commission (CFTC) demanding a federal crackdown on sports prediction markets hosted on platforms such as Kalshi and Polymarket. Eight days earlier, the American Gaming Association — the trade group that speaks for the casino industry — handed Maryland regulators a drafted letter making that exact case. The state's document sent to the CFTC matched it almost exactly.
A spokesman for the agency insists Maryland "independently” evaluated the issue, in the same way a student who copies a paper word for word "independently” arrives at the same thesis as the kid sitting next to him.
In the world of lobbying and government affairs, it’s perfectly normal for industry insiders to draft legislation for congressional offices to consider and integrate into bills. It is not normal, however, for one established interest group to menace its perceived competition by using the state government like a sock-puppet account.
This is a classic case of regulators getting too close to established businesses and going to bat to protect their interests. It’s called cronyism, and the casino lobby is clearly desperate to claw back consumers who have started using prediction markets for sports contracts.
Examples of cronyism include trade associations using state licensing boards to box out new entrants in cosmetology or interior design, or the taxi medallion system coveted by the taxi industry in the world’s largest cities—facing extinction due to Uber/Lyft and, worse, self-driving cars. In the world of gambling, casinos are naturally at odds with digital apps for gaming, because they threaten foot traffic into brick-and-mortar locations where consumers may eat, drink, and spend more money.
The rapid rise of prediction markets has raised some valid questions about whether event contracts fall under state or federal jurisdiction, and the CFTC, along with affected industries, will hammer that out in court. What should not happen is what occurred in Maryland, where the distinction between government regulators and market competition is all but erased.
In some ways, Kalshi and Polymarket are competitors for the casinos, but so is everything else in the open market that’s not a casino — whether it be nightclubs or concerts. In other ways, prediction markets offer distinct products and services for investors that you’ll never find in a casino betting against the house.
A Kalshi or Polymarket contract is a price between zero and a dollar that moves in real time as new information arrives, converting scattered private knowledge into a single public number anyone can read. When Kalshi's markets correctly called 19 of 24 Oscar categories this year, that was thousands of people with scraps of insider knowledge or expertise — getting paid to be right — and their positions aggregated into a forecast more accurate than any single pundit could produce.
As Kalshi's Tarek Mansour has put it, the incentive structure of these markets rewards truth because it generates volume and liquidity. Compare that to the news media's incentive structure, which, for two decades, has rewarded whichever headline gets the click and drives ad revenue—accuracy is an afterthought.