Crypto.com and Novig Challenge Missouri’s Sports Betting Crackdown in Federal Court

Two prediction market operators are seeking to prevent Missouri from applying its gambling laws to sports event contracts, arguing that federal commodities law gives the Commodity Futures Trading Commission exclusive regulatory authority.

Crypto.com’s prediction market exchange and Novig have filed separate federal lawsuits against Missouri officials, escalating a nationwide legal dispute over whether sports-related event contracts should be regulated as financial derivatives or as conventional sports wagers.

The lawsuits were filed on October 16, 2026, as a 30-day compliance deadline imposed by Missouri Attorney General Catherine Hanaway expired. The state had ordered six prediction market operators to stop offering sports event contracts to Missouri residents unless they obtained the necessary state gambling licences and complied with the state’s tax and age restrictions.

Both companies are challenging Missouri’s authority to regulate their products under state gambling laws. Their central argument is that the federal Commodity Exchange Act gives the Commodity Futures Trading Commission (CFTC) exclusive jurisdiction over contracts traded on federally designated derivatives exchanges, pre-empting conflicting state gambling requirements.

The cases represent a further development in an increasingly contested regulatory environment for prediction markets, with federal appeals courts reaching different conclusions about the relationship between commodities regulation and state gambling laws.

Missouri orders six prediction market operators to comply

Hanaway’s office sent cease-and-desist letters to six operators on September 16 and 17: Crypto.com, Novig, Kalshi, Polymarket, Robinhood and Underdog.

The letters gave the companies 30 days to stop offering sports event contracts to Missouri residents or obtain licences from the Missouri Gaming Commission and comply with the state’s sports wagering requirements.

Those requirements include a 10% tax on adjusted gross sports wagering revenue, applicable licensing fees and a minimum age of 21 for sports betting customers. The licensing fees identified in reporting on the enforcement action could reach $500,000.

Missouri’s position is that companies cannot avoid gambling regulation simply by describing sports wagers as event contracts traded on a prediction market. The state considers the products to constitute sports wagering when they allow customers to trade on the outcomes of sporting events.

“Companies cannot repackage sports bets as ‘event contracts’ to evade Missouri law,” Hanaway said in a public statement.

The attorney general also said the state intended to enforce the sports betting framework approved by voters and protect consumers.

Missouri voters approved Amendment 2 in November 2024, legalising sports wagering. The regulated market began operating on December 1, 2025, under the supervision of the Missouri Gaming Commission.

The attorney general’s office argued in its letters that existing federal court decisions generally supported the state’s position that the Commodity Exchange Act did not prevent states from applying their gambling laws to sports event contracts. The letters cited decisions from federal appeals courts that had rejected key arguments advanced by prediction market operator Kalshi.

The enforcement action therefore placed the six companies before a clear choice: comply with Missouri’s regulatory framework or risk enforcement proceedings.

By the time the deadline expired, Crypto.com’s exchange and Novig had chosen to challenge the state in federal court rather than accept the demands or withdraw from the market.

Crypto.com challenges the state’s jurisdiction and licensing requirements

Crypto.com’s case was brought by North American Derivatives Exchange Inc. (Nadex), the federally designated exchange behind the company’s OG prediction markets platform. The lawsuit was filed in the US District Court for the Western District of Missouri under the case name North American Derivatives Exchange Inc. v. Hanaway.

Nadex argues that the Commodity Exchange Act places its contracts under the CFTC’s exclusive jurisdiction and prevents Missouri from applying its state gambling laws to those transactions. The exchange is seeking a declaratory judgment confirming its legal position and a permanent injunction prohibiting Missouri officials from enforcing the disputed requirements against its sports event contracts.

The complaint also raises a procedural objection to the state’s enforcement notice. According to the exchange, Hanaway’s office incorrectly addressed the cease-and-desist letter to Foris DAX Inc., rather than to North American Derivatives Exchange, the entity operating the federally regulated market.

Nadex further argues that obtaining a Missouri sports wagering licence is not a realistic alternative. Under the state’s constitutional framework, only two direct mobile sports wagering licences are available, and both have already been awarded. Other routes to licensing are tied to eligible gambling boats and professional sports teams.

The exchange contends that these restrictions make it difficult, if not impossible, for a new operator to comply with the state’s demand to obtain a licence. In its view, the licensing requirement effectively forces the company to stop serving Missouri customers, even though it maintains that federal law governs its contracts.

The attorney general’s letter also questioned the platform’s minimum age requirements.

Missouri officials pointed to terms allowing customers aged 18 and older to trade, compared with the state’s minimum age of 21 for legal sports betting.

The age issue provides a separate consumer-protection dimension to the dispute, alongside the broader disagreement over federal and state regulatory authority.

Novig seeks preliminary protection while an appeals court considers the issue

Novig brought its case through Ludlow Exchange LLC, the company operating its prediction market. The lawsuit was filed in the US District Court for the Eastern District of Missouri under the case name Ludlow Exchange LLC v. Hanaway.

The defendants include Hanaway, Missouri Gaming Commission executive director Michael Leara and commission chair Jan Zimmerman. Nadex’s separate lawsuit also names additional members of the commission.

Like Nadex, Ludlow argues that the Commodity Exchange Act gives the CFTC exclusive authority over contracts traded on a federally designated contract market. Ludlow received its CFTC designation on June 16, 2026.

Novig is seeking both preliminary and permanent injunctions to prevent Missouri officials from enforcing the state’s gambling laws against its sports event contracts.

Its request for preliminary relief is particularly significant because a related dispute involving Kalshi is pending before the US Court of Appeals for the Eighth Circuit, which has jurisdiction over Missouri.

The Kalshi case concerns the application of state gambling laws to prediction market contracts in Iowa. Novig wants the Missouri court to preserve the existing situation while the appeals court considers the underlying question of federal pre-emption.

The company’s position is that forcing it to leave Missouri or face enforcement before the appeals court reaches a decision could undermine its ability to operate under the federal regulatory framework it says governs its exchange.

Novig has also argued in related litigation that conventional sportsbook licensing systems are not necessarily suited to exchanges that match buyers and sellers rather than acting as the house taking the opposite side of each wager.

In one filing concerning the broader dispute, the company stated: “A licensing regime calibrated to the economics of the house does not readily accommodate a market with no house.”

That argument reflects a fundamental difference between the business models. Traditional sportsbooks typically accept wagers and manage their exposure to the outcomes, whereas prediction market exchanges facilitate trading between participants in contracts tied to future events.

Novig maintains that this distinction, together with its federal designation, supports its contention that state sportsbook regulations should not automatically apply to its products.

A broader legal campaign against state restrictions

The Missouri lawsuit is part of Novig’s wider effort to challenge state-level restrictions on sports event contracts.

The company has pursued legal action in several other jurisdictions, including New York, New Mexico, Washington, Massachusetts and Wisconsin. The Missouri case adds another front to its campaign against the application of state gambling laws to federally regulated prediction markets.

The company has continued developing its commercial profile alongside its legal efforts.

Novig has partnered with the New York Mets, becoming the baseball team’s official prediction market partner, and has attracted public attention through advertising featuring actress Sydney Sweeney.

The lawsuits are not confined to the question of whether a state can require a licence. They also concern the potential consequences for exchanges that continue operating while disputing a state’s authority.

Novig has argued that enforcement could expose it to criminal liability under state gambling statutes, civil penalties under consumer-protection legislation and other measures intended to stop allegedly unlawful activity.

For the company, the preliminary injunction request offers a means of seeking protection while the federal courts work toward a more definitive answer.

Kalshi, Polymarket, Robinhood and Underdog have not filed Missouri lawsuits

Crypto.com and Novig were the only two of the six companies targeted by Missouri to have filed federal lawsuits in the state as of October 18, according to reports reviewing court records.

Kalshi, Polymarket, Robinhood and Underdog had not filed cases in either Missouri federal district by that date. Their absence from the litigation does not establish that they have accepted the state’s position or decided to stop offering their products.

Kalshi, however, had reportedly entered discussions with Hanaway’s office. The attorney general’s office described those discussions as ongoing in early October.

Underdog has pursued legal action elsewhere, including a lawsuit against Connecticut officials over a similar dispute involving sports prediction contracts, but had not filed a Missouri case at the time of the reports.

The different responses suggest that the companies are assessing their legal positions and regulatory risks separately, even as they confront a common question about the authority of the CFTC and state gambling regulators.

Federal appeals courts remain divided

The most consequential issue in the Missouri lawsuits is whether the Commodity Exchange Act pre-empts state gambling laws when applied to sports event contracts traded on federally designated exchanges.

The federal courts have not reached a uniform conclusion.

The US Court of Appeals for the Third Circuit has sided with Kalshi in a related dispute, supporting the argument that federal commodities law limits a state’s ability to regulate the relevant contracts. By contrast, the Sixth and Ninth Circuits have issued decisions against Kalshi’s position in disputes involving state authorities.

These conflicting decisions have created uncertainty for prediction market operators that offer contracts on sporting events across state lines.

The Eighth Circuit’s pending consideration of Kalshi’s Iowa dispute is especially relevant to the Missouri cases. Because Missouri falls within that circuit, its eventual ruling could significantly influence how the new lawsuits are decided.

Novig’s request to preserve the status quo while that appeal proceeds is an attempt to avoid having its Missouri operations subjected to enforcement before the regional appeals court clarifies the legal position.

Nevertheless, neither company has yet established that its interpretation of federal law will prevail in Missouri. The lawsuits ask the courts to resolve that question; filing them does not itself prevent state enforcement unless the courts grant appropriate relief.

The CFTC’s evolving approach adds another layer of uncertainty

The dispute is also unfolding as the CFTC considers the regulatory treatment of sports event contracts.

The commission has proposed defining sports event contracts as swaps, a classification that could be relevant to the exchanges’ arguments that their products fall within federal commodities regulation.

The proposal was open for public comment until November 18, 2026, according to reporting published in October. The CFTC also introduced an exclusion affecting licensed sportsbooks that took effect on October 19.

However, a proposed regulatory definition is not the same as an enacted rule, and the courts must still consider the statutory framework in force when deciding the current cases. The Sixth Circuit’s ruling against Kalshi, in particular, illustrates that federal regulation does not automatically resolve every dispute in favour of prediction markets.

For the Missouri exchanges, the legal challenge is therefore about more than whether sports event contracts resemble wagers in an ordinary commercial sense. It concerns how Congress allocated regulatory authority between the federal commodities regulator and state governments, and whether the relevant contracts fall within the scope of that federal authority.

A potentially important test for prediction markets

The lawsuits against Missouri officials could become an important test of how sports prediction markets operate in states that consider their products to be unlicensed gambling.

For Missouri, the issue involves enforcing the regulatory system voters approved, ensuring that operators meet the state’s minimum age requirements and collecting the taxes and fees imposed on licensed sports wagering businesses.

For Nadex and Ludlow, the dispute concerns whether exchanges already designated under federal law can be required to comply with state sportsbook licensing systems, particularly where the available licences are limited.

The outcome may also affect the other operators that received Missouri’s cease-and-desist letters, even though four of them had not filed lawsuits in the state by October 18.

The immediate legal question is whether either exchange will obtain an injunction protecting it from Missouri enforcement. The wider question is whether the Eighth Circuit, following decisions elsewhere that have divided the federal courts, will establish a clearer framework for sports event contracts.

Until those questions are resolved, prediction market operators face an uncertain balance between federal regulatory status and the demands of individual states seeking to regulate sports-related trading as gambling.

By fLEXI tEAM