Crypto.com, Novig Sue Missouri Over Prediction Market Fight on Sports Event Contracts
Summary
- Crypto.com’s prediction market exchange and Novig filed lawsuits in federal court challenging Missouri authorities’ demands to halt operations for sports event contracts and pay a 10% sports betting tax.
- NADEX said that, as a CFTC-registered exchange, federal law gives it exclusive regulatory authority over event contracts, and it asked the court to block enforcement of state gambling laws and issue a permanent injunction.
- US courts remain divided over whether federal derivatives regulation or state gambling laws take precedence for prediction market sports event contracts, and the report said the lawsuits were filed amid that broader regulatory clash.
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Crypto.com’s prediction market platform and Novig have filed federal lawsuits against Missouri authorities after the state classified their sports event contracts as gambling.
The Block reported on October 18 that Crypto.com’s prediction market exchange and Novig each sued in federal court on October 16 to block the Missouri attorney general’s office from applying sports betting rules to their businesses. The filings came as the state’s deadline to halt operations expired.
Missouri Attorney General Andrew Bailey’s office had earlier sent cease-and-desist letters on September 16 and September 17 to six companies: Crypto.com, Novig, Kalshi, Polymarket, Robinhood and Underdog. The letters said the companies had 30 days either to stop offering sports event contracts to Missouri residents or obtain approval from the state gaming commission and pay a 10% sports betting tax.
Bailey said companies cannot evade Missouri law by packaging sports betting as “event contracts.” He also cited the fact that Crypto.com’s platform allows users as young as 18 to trade. Missouri’s legal minimum age for sports betting is 21.
North American Derivatives Exchange, or NADEX, which operates Crypto.com’s prediction market platform, filed suit in the US District Court for the Western District of Missouri. As an exchange registered with the Commodity Futures Trading Commission, NADEX argued that the Commodity Exchange Act gives the CFTC exclusive authority over event contracts and that federal law should preempt the state’s gambling statutes.
NADEX asked the court for a declaratory judgment confirming that authority and for a permanent injunction barring state enforcement. It also said Missouri’s two direct licenses for mobile sports betting operators have already been awarded, making it impossible to obtain a new license.
Novig also sued in the US District Court for the Eastern District of Missouri through its exchange operator, Ludlow Exchange, and sought preliminary and permanent injunctive relief. The company argued that current operations should be preserved until the US Court of Appeals for the Eighth Circuit rules in Kalshi’s Iowa case, which raises the same issue.
US courts have split on whether federal derivatives rules or state gambling laws take precedence for sports event contracts offered by prediction markets. The Sixth and Ninth Circuit Courts of Appeals have ruled against Kalshi in related cases, while the Third Circuit sided with the company.
Kalshi, Polymarket, Robinhood and Underdog, which received the same cease-and-desist letters, had not filed suits in federal courts in eastern or western Missouri as of October 18, the report said. Kalshi is in talks with the Missouri attorney general’s office. The lawsuits were filed amid an ongoing clash over whether federal or state authorities should regulate prediction market products.
