Missouri AG issues cease-and-desist orders to six prediction markets
COLUMBIA, Mo. (KMIZ)
Missouri Attorney General Catherine Hanaway issued cease-and-desist orders to six online prediction market operators, demanding they stop offering sports "event contracts" to state residents without a sports wagering license, according to a Friday press release from her office.
The letters were sent to Polymarket, Kalshi, Crypto.com, Novig, Underdog and Robinhood. The AG's Office claims that operating sports-related contracts is considered unlicensed sports gambling under Missouri law.
Ryan Butler, a senior news analyst for Covers.com, said prediction market companies are labeling themselves as stock trading companies, comparing their methods of betting to those similar to the stock market.
"The idea in their mind, the prediction markets, is that trading the outcome of that baseball game or a football game or anything like it is no different than trading on what you think a stock will happen," said Butler. "You can buy or sell trades just like you do for stocks."
ABC 17 News reported on Thursday the rise in prediction markets could result in significant losses in tax revenue. Previous reporting shows that prediction markets have argued that their event contracts are financial products subject to federal regulation instead of state-regulated sports wagers.
"Missourians voted for a safe, well‑regulated sports wagering market that supports public education and addresses problem gambling," Hanaway said in the release. "Companies cannot repackage sports bets as ‘event contracts’ to avoid Missouri law. We will enforce the rules voters approved and protect consumers."
Under Amendment 2, which Missouri voters passed in November 2024, the Missouri Gaming Commission oversees sports wagering. The voter-approved framework imposes a 10% tax on sports betting gross receipts to help fund public education and sets the legal gambling age at 21.
Prediction market platforms let users trade contracts tied to sports game outcomes. The AG's office cited claims that these platforms either allow underage users to access sports contracts or lack age-verification methods.
Butler said that prediction markets believe that since 18-year-olds can open stock market accounts, their users shouldn't have to be 21, since they consider themselves similar to a stock company.
"It's kind of the idea is like, well, so we're like, an 18-year-old is allowed to open up a stock market account, you know, on Robinhood or through whatever," Butler said. "And they go, 'Well, why can't they do this because it's just like stock trading?'"
In the letters, the state rejected the claims made that event contracts do not qualify for federal financial regulations or state oversight by stating that online sports wagering platforms remain subject to state gambling laws.
"Federal law does not preempt state law in this area, and sports “event contracts” do not qualify as “swaps” governed by the federal Commodity Exchange Act, as frequently claimed by illegal online sportsbooks," Hanaway stated in the letters.
Hanaway called on the six companies to comply with state law, or the office indicated that failure to comply will lead to legal action taken.
"Missouri expects all online sports wagering platforms to comply with Missouri’s sports betting laws, and Kalshi is no exception," Hanaway wrote in her letter to Kalshi. "The only immediate solutions available to Kalshi are to bring its operations into compliance with Missouri law or to stop offering its online sports wagering platform to individuals located in the State of Missouri. Otherwise, the State of Missouri will take legal action against Kalshi."
Missouri is not the only state to send a letter to prediction markets, and this is the first step in a long journey, according to Butler. He said this matter could make its way to the Supreme Court but it would not be immediate.
"We're going to have to make a really important decision about a very interesting legal issue. And that decision isn't for another year or two at least," Butler said.
ABC 17 News received a statement from the Missouri Gambling Commission on Friday stating that prediction markets are sports betting platforms.
"The MGC will await the outcome of several court cases at the federal and state levels to help determine action or inaction by the agency in the future," Elizabeth Hoffman, a spokesperson for the Gaming Commission, said. "We do believe there is an impact of prediction markets on sports wagering revenue; however, because they are not regulated, we have no idea what level that would be."
