Key Points
- Two prediction market operators filed federal lawsuits against Missouri officials on Friday challenging the state’s enforcement actions on sports event contracts.
- In September, Missouri’s Attorney General Catherine Hanaway issued cease-and-desist orders to six companies, providing a 30-day compliance window.
- Court records show Kalshi, Polymarket, Robinhood and Underdog have not initiated litigation in Missouri.
- The Crypto.com platform argues the cease-and-desist letter was misdirected and notes Missouri has exhausted its sports betting license allocation.
- Different federal circuit courts have issued conflicting rulings on whether federal regulations preempt state gambling statutes for these financial instruments.
Two prediction market platforms have escalated their dispute with Missouri to federal court. Crypto.com’s derivatives exchange and Novig filed separate legal challenges on Friday seeking to block state enforcement of sports wagering regulations against their event contract offerings.
The legal action follows the expiration of compliance deadlines specified in cease-and-desist notices issued by Missouri Attorney General Catherine Hanaway. Meanwhile, four additional recipients of identical notices have chosen not to pursue litigation.
State Targets Half-Dozen Platforms
Hanaway dispatched the enforcement letters between Sept. 16 and 17 to six platforms: Crypto.com, Novig, Kalshi, Polymarket, Robinhood and Underdog. The notices gave each company a 30-day window to cease providing sports event contracts to Missouri residents.
Alternatively, companies could pursue licensing through the Missouri Gaming Commission and submit to the state’s 10% wagering tax. The commission has regulated authorized sports wagering operations since state voters endorsed legalization in November 2024.
Hanaway’s communication to Crypto.com specifically noted the platform permits users as young as 18 to participate in trading. Missouri law establishes 21 as the minimum age for sports wagering activities.
“Companies cannot repackage sports bets as ‘event contracts’ to evade Missouri law,” Hanaway said in a post on X.
Legal Arguments in Federal Filings
The North American Derivatives Exchange, which operates Crypto.com’s prediction markets infrastructure and maintains registration with the Commodity Futures Trading Commission (CFTC), submitted its complaint to the Western District of Missouri.
The filing contends that the Commodity Exchange Act grants the CFTC “exclusive jurisdiction” over its financial products. The exchange maintains this federal statute supersedes state gambling regulations. The platform seeks both declaratory relief and a permanent injunction.
The legal submission further asserts Hanaway “incorrectly addressed” her notice to Foris DAX, Inc. rather than the proper exchange entity. It points out that obtaining a sports wagering license is impossible since Missouri’s state constitution restricts direct mobile sports wagering licenses to two operators, both of which have already been granted.
Novig pursued its case through Ludlow Exchange LLC in Missouri’s Eastern District. The company requests both preliminary and permanent injunctive relief. Novig has previously initiated legal proceedings against authorities in multiple jurisdictions, including Wisconsin.
Novig contends the court should maintain the current operational status while a related appellate matter proceeds. The 8th Circuit, which has jurisdiction over Missouri, is currently reviewing an appeal addressing identical legal issues in a Kalshi dispute originating from Iowa.
Federal appellate tribunals have issued contradictory determinations on whether federal law preempts state gambling statutes regarding sports event contracts. The 6th and 9th Circuits ruled unfavorably for Kalshi, whereas the 3rd Circuit supported the company’s position.
Kalshi responded first among the six targeted companies to Hanaway’s enforcement letters. On Oct. 2, Spectrum News reported the attorney general’s office characterized “ongoing discussions” with the platform.
Underdog initiated litigation against Connecticut last month following a comparable regulatory action. The company has not filed suit in Missouri.
Crypto.com, Novig and Missouri’s attorney general’s office did not provide immediate responses to comment requests.
As of Sunday, court records examined by The Block confirm that Kalshi, Polymarket, Robinhood and Underdog had not filed litigation in either of Missouri’s federal judicial districts. The four companies did not immediately respond to requests for comment.
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