The head election official in Maryland is hoping the state prosecutor will look into the legitimacy of prediction markets as their popularity continues to soar nationwide.
Elections Administrator Jared DeMarinis several weeks ago issued a warning about trading contracts related to in-state election outcomes, which he claimed was illegal. His follow-up is an escalation of preemptive action before November's midterm elections, which are expected to draw huge interest from prediction traders.
Maryland law says no prediction markets?
Maryland law prohibits individuals from wagering on the outcomes of elections. Although this law was signed before prediction markets were in the public view, DeMarinis believes that it should ban trading in these markets.
“Currently, prediction market platforms permit participants to wager money on the outcome of State and local elections, with financial returns dependent upon the results certified by election officials,” DeMarinis wrote in a letter dated July 23. “These activities raise substantial questions as to whether such contracts constitute prohibited wagering on election outcomes under Maryland law. From my plain reading of the statute and how the sites operate, I believe they do.”
The State Prosecutor — Charlton T. Howard III — is in charge of criminal investigations pertaining to election and campaign finance. Although DeMarinis opined that Election Law should already ban prediction market trading on elections, he sought Howard’s opinion and asked him to clarify any ambiguities, if necessary.
The letter did not ask Howard III to levy criminal punishment against individuals who traded on elections, according to Maryland Matters.
Howard III said in an email to Maryland Matters that he would not comment on ongoing investigations.
Prediction markets lean into elections
Prediction markets contain expansive menus for election traders. Markets are available for local elections, federal races, and gubernatorial campaigns, along with all-encompassing questions such as “Which party will win more seats in the House?”
Kalshi, America’s leader in prediction markets, recently added a midterm election hub to give traders easier access and information. The hub, visible in all states including Maryland, displays prediction markets of interest, campaign finance records, polling information, and pertinent data. The hub is meant to serve both traders and individuals seeking general information for research, journalism, and related interests.
Hundreds of thousands were already traded on races in Maryland during the primary election at popular platforms like Kalshi, along with competitors such as Polymarket and Robinhood. If DeMarinis interpreted the state rules correctly, each of those transactions would represent a criminal violation.
“Maryland has a compelling interest in preserving the integrity and public trust of elections,” DeMarinis wrote. “Financial incentives should not influence or appear to influence election results. Artificial online markets should never determine electoral outcomes; only voters using their voice should determine electoral outcomes free of any undue influence, threats, intimidation or financial gain.”
Wisconsin made a similar attempt
Although Maryland’s existing law may differentiate it from other states, it is not the only jurisdiction to sound the alarm before election season.
The Wisconsin Election Commission said on Tuesday that anyone who traded prediction market contracts related to elections in which they voted would be in violation of state law and would have their ballot disqualified. A Kalshi official lashed out at officials, saying they had no right to remove citizens’ voting rights because they participated in legal trading markets.
“The Wisconsin Elections Commission should retract this guidance before courts are required to force them to do so,” Robert DeNault, the company’s head of enforcement and legal counsel, wrote.
The Trade Handle Prediction Markets Take
States have been unable to stop the spread of prediction markets as a whole. They pivoted to targeting sports, and now elections; the verdict of the state prosecutor could set a nationwide precedent for legislators if it is proven that writing election trading bans into law could shut down these prediction markets.