Missouri Attorney General Catherine Hanaway has made sports event contract trading in the state a legal issue by ordering six of the most prominent platforms for such trading to stop offering contracts of that type within Missouri’s borders. Hanaway distributed the orders as multiple federal courts could adjudicate the legality of sports event contract trading.
There are multiple requests before the United States Supreme Court on the subject. Hanaway’s actions could increase the likelihood that the justices grant an appeal in related litigation.
Hanaway demands Kalshi, Polymarket, others restrict operations in Missouri
According to a Friday press release, Hanaway sent six letters demanding that the recipients “comply with Missouri law without delay and to cease and desist from offering sports event contracts to Missourians” or face “enforcement action by the State of Missouri.” The six recipients are some of the most popular exchanges in the US.
- Crypto.com
- Kalshi
- Novig
- Polymarket
- Robinhood
- Underdog
The statement adds that “facilitating such ‘event contracts’ constitutes unlicensed sports wagering under Missouri law.” None of the companies behind these exchanges have publicly responded to the demands yet.
They may be waiting to see whether the Supreme Court will weigh in on the issue. Each state government that disputes the legality of sports event contract trading makes that outcome more likely.
Missouri enforcement action compounds need for definitive answers to legal questions
A total of three petitions for review are currently before the US Supreme Court involving two disputes between prediction market exchange operators and state government officials. New Jersey officials have asked the Supreme Court to take a look at an order from the US Third Circuit Court of Appeals enjoining them from enforcing that state’s gambling laws against Kalshi.
Meanwhile, Crypto.com and Robinhood have each filed requests for review of the Ninth Circuit’s decision in Kalshi v. Assad. That opinion states that sports event contracts are legally equitable to gambling and therefore, Nevada’s gambling laws are enforceable against Kalshi.
That opinion on the legal parameters of sports event contracts and state sovereignty explicitly contradict the Third Circuit’s reading of the situation. Hanaway’s actions adds Missouri to the list of states that favor one interpretation or another.
Thus, the Supreme Court’s role in establishing a national standard becomes clearer. However, the Supreme Court could still deny all three requests, and Hanaway may not be content to wait for an announcement on the petitions.
Exchange operators will still have to deal with Hanaway’s demands, even if only on a short-term basis.
New filings in federal courts in Missouri could be forthcoming
There are two federal district courts that split Missouri into eastern and western jurisdictions. The recipients of Hanaway’s letters could sue her in either of those jurisdictions and ask the court to enjoin Hanaway from enforcing the cessation demands.
Additionally or alternatively, the US Commodity Futures Trading Commission (CFTC) may take similar action. The CFTC has done so in nearly a dozen other instances in which state gambling regulators or law enforcement have tried to restrict prediction market activity.
The Supreme Court may not publish whether it will take up any of the appeals for months. Even if the Supreme Court does agree to hear at least one of the cases, it would still take several months thereafter for the justices to issue a ruling.
More litigation may be necessary for the exchanges to protect their businesses in Missouri in the meantime. Hanaway’s actions against the operators have initiated that chain of events.
