Two prediction market operators asked federal courts in Missouri on October 16 to block enforcement of state sports wagering rules against their sports event contracts. Nadex, the exchange that runs Crypto.com's OG platform, and Novig's Ludlow Exchange LLC say their products belong under federal oversight through the Commodity Exchange Act, not Missouri licensing. The dispute began with September cease-and-desist letters and could determine whether a state can require a federally registered derivatives exchange to hold a gambling license.
Missouri Ordered Six Companies to Stop
Attorney General Catherine Hanaway sent cease-and-desist letters on September 16 and 17 to Novig, Crypto.com, Kalshi, Polymarket, Robinhood and Underdog. The six operators were given 30 days to halt sports event contracts in the state or seek proper authorization. Hanaway's position is that such contracts remain gambling even when presented as financial derivatives. Missouri voters approved sports wagering in November 2024, and regulated betting started in December 2025. Licensed operators pay 10% of adjusted gross wagering revenue and must keep out people under 21. FinanceFeeds reported that Hanaway also alleged some platforms, including Crypto.com, allowed underage users to participate.
Federal Commodities Law Is the Core Argument
The lawsuits rest on whether federal law leaves room for state gambling enforcement. Both companies maintain that sports event contracts offered on registered derivatives exchanges are subject to sole CFTC authority under the Commodity Exchange Act, so Missouri cannot impose its sports wagering requirements. Nadex is asking for a declaratory judgment and permanent injunction against state officials. Novig argues that its contracts are swaps under the federal statute. Neither complaint declares the exchanges exempt from state law as a settled matter; each asks a court to resolve an open preemption question. According to Betting News, Missouri is the sixth state where Novig has filed such a challenge, following New York, Wisconsin, Washington, New Mexico and Massachusetts.
Each Exchange Cites Separate Licensing Hurdles
Nadex says the state sent its letter to the wrong party, Foris DAX, Inc., instead of the regulated exchange that actually operates the contracts. It also notes that both of Missouri's standalone mobile sports wagering licenses are already taken, so obtaining one is not possible. Novig's filing points to a different concern: if Missouri forces its customers to be separated, the exchange could lose access to a national trading pool. Prediction markets pair buyers and sellers, unlike sportsbooks that take the opposite side of bets, so geographic limits could split liquidity and hurt price discovery, Novig argues. FinanceFeeds adds that a state-by-state approach could raise compliance costs and shrink the customer base beyond the 10% tax.
Appellate Courts Have Split on Preemption
Federal appeals courts have not spoken with one voice. In April, the Third Circuit protected Kalshi from New Jersey enforcement and found a reasonable likelihood of success on preemption. By contrast, in September the Sixth Circuit ruled against Kalshi in Ohio and Tennessee, saying it had not proven the sports contracts were swaps under federal law and rejecting the argument that the Commodity Exchange Act displaced state gambling rules. The Ninth Circuit also sided against Kalshi in a September tribal gaming dispute, though that case involved a different legal theory. Novig wants the Missouri court to let its platform keep operating while the Eighth Circuit handles a related Kalshi appeal from Iowa; according to the complaint, briefing in that appeal ends on December 6.
CFTC Rules Could Change the Outlook
Regulatory action adds another layer. The CFTC submitted two proposals for White House review in late September. One would expand the swap definition to include event contracts, while an interim final rule would exclude casino-style gambling products from the swap category. That split may determine which prediction markets get federal derivatives oversight and which remain under state gambling regulation. FinanceFeeds notes the proposals would not automatically decide the current cases; courts must still interpret the Commodity Exchange Act independently, and states can challenge any new CFTC rule. In July, a group of 44 state attorneys general pushed back on the CFTC's direction, arguing the agency was trying to displace state authority.
