Missouri Attorney General Catherine Hanaway anticipated a legal battle over the prediction markets she targeted last month, and now two companies, Novig and Crypto.com, have indeed taken her to court.
Both firms filed separate lawsuits in federal court last week, seeking to prevent Missouri officials from enforcing state sports wagering regulations against their prediction markets in the state. These filings came after the deadline set by Hanaway's cease-and-desist letters expired.
Novig, through its exchange operator Ludlow Exchange LLC, filed suit in the Eastern District of Missouri. Meanwhile, North American Derivatives Exchange, which supports Crypto.com's prediction markets, submitted its case in the Western District.
Several other firms received cease-and-desist letters from Missouri but have yet to initiate legal action. These include Kalshi, Polymarket, Robinhood, and Underdog.
In its lawsuit, Novig named Hanaway alongside officials Michael Lear and Jan Zimmerman from the Missouri Gaming Commission (MGC). Novig is seeking a court declaration that Missouri's gambling laws do not apply to its exchange and is requesting both preliminary and permanent injunctions. The company's argument is built on the premise that its event contracts qualify as swaps under the Commodity Exchange Act, placing them under the jurisdiction of the Commodity Futures Trading Commission (CFTC). Novig pointed to a proposal from the CFTC on October 9, which advises defining event contracts related to various topics, including sports, as swaps.
The lawsuit challenges Missouri's licensing requirements for prediction markets, contending that such regulations do not accommodate exchanges effectively. For Novig to obtain a license, it would need to geofence participants within Missouri and comply with a 10% state tax, which would disrupt the national liquidity required for their platform. The complaint states, "A licensing regime calibrated to the economics of the house does not readily accommodate a market with no house."
Novig also distinguishes itself by implementing stronger age restrictions than other prediction markets in Missouri. While Hanaway's office indicated that five of the six firms allowed users under 21 or lacked proper safeguards, Novig enforces a strict rule that traders must be at least 21 years old. The company is asking the court to maintain the current status of Missouri prediction markets while the Eighth Circuit Court of Appeals evaluates an appeal from Kalshi regarding a similar issue.
Crypto.com has adopted a similar stance, arguing that Hanaway incorrectly addressed her letter to Foris DAX, Inc., instead of their exchange. This suit also asserts that obtaining a license is not a feasible option; the Missouri constitution permits only two untethered mobile betting licenses, both of which are already in use. Crypto.com argues that with no available licenses, Hanaway's directive effectively constitutes a ban on their operations in the state.
Earlier this month, Crypto.com and Robinhood asked the U.S. Supreme Court to consider the overarching jurisdiction dispute related to sports event contracts.
The conflict escalated when Hanaway issued her cease-and-desist letters in September, arguing that the prediction markets involved are essentially unlicensed sports bets under Missouri's legislative framework approved by voters in 2024. She noted that litigation was likely from the affected companies, stating, "Chances are they may sue us once they get this cease-and-desist letter."
The letters have had wider repercussions, prompting PrizePicks—a licensed daily fantasy operator that did not receive a letter—to suspend its sports prediction markets product, Team Picks, in Missouri.
Kalshi has publicly responded, with Head of Research Nicole Kagan explaining to St. Louis Public Radio that their platform operates as a peer-to-peer exchange and does not profit from customer losses. Reports indicate that Hanaway's office has indicated ongoing discussions with Kalshi.
As the Eighth Circuit prepares for deliberations, Kalshi’s appeal from Iowa remains a crucial factor influencing both Missouri cases. In September, U.S. District Judge Stephen Locher denied Kalshi a preliminary injunction, finding the company's chances of success on preemption to be low. Kalshi's initial brief is expected by November 6, while Novig's complaint indicates that the briefing process will conclude by December 6. The outcome of this ruling will have implications for federal courts across Missouri and six additional states.
Meanwhile, other appeals courts have reached divergent conclusions. The Third Circuit sided with Kalshi in New Jersey, while the Ninth Circuit ruled against it in Nevada. The Sixth Circuit has backed the decisions of Ohio and Tennessee, leading Ohio’s regulatory body to issue cease-and-desist letters to ten companies. In Utah, the Tenth Circuit denied Kalshi an injunction following a district judge’s ruling in favor of the state.
New Jersey has requested the Supreme Court to address this jurisdictional split, and Kalshi must submit its response by November 9. A joint brief from the NFL, the American Gaming Association, 145 tribes, and 39 states, along with the District of Columbia, has urged the Supreme Court to engage with the case.
Now Missouri is joining this initiative, with Hanaway’s office recently endorsing the Ohio-led brief, after previously opting out of a 44-state letter sent to the CFTC in July.
