Missouri is on the verge of joining the ongoing battle over prediction markets, as legal disputes unfold nationwide and the sector continues to grow beyond legal confines.
Attorney General Catherine Hanaway is preparing to take action against prediction market companies operating within the state, potentially intensifying the ongoing state-level conflicts surrounding sports event contracts.
This initiative comes as various states challenge the federally regulated prediction market sector, even as its influence expands and the Commodity Futures Trading Commission (CFTC) clarifies how third parties can access event contracts.
In an interview with Heartland News, Hanaway revealed her office is pursuing a cease-and-desist order against these companies, asserting that she considers sports event contracts to be a form of gambling under Missouri law. She emphasized that despite the differences in fee structures between prediction markets and traditional sportsbooks, the essence remains the same.
“The way they handle contracts, which they refer to as bets on sporting events, is akin to how companies like FanDuel operate,” Hanaway stated. “Even if their fee structures differ slightly, they still unequivocally fit the definition of gambling in Missouri.”
Additionally, the Attorney General expressed her concerns regarding consumer protections at platforms like Kalshi and Polymarket, particularly focusing on age verification and the risk of insider trading.
Hanaway mentioned that her office is open to negotiating a settlement and is optimistic about reaching an agreement. She highlighted that Kentucky is nearing a resolution after previously pursuing enforcement actions this year.
The primary aim is to bring prediction market operators under Missouri's gaming regulations and ensure they comply with gambling tax obligations. If this does not occur, the state is prepared to initiate legal proceedings.
She also acknowledged the possibility that prediction markets may retaliate with legal actions against the state in federal court.
In a related development, Kalshi has decided to withdraw its lawsuit in Montana, where the state has agreed to pause enforcement of its gambling laws against the prediction market operator while a Ninth Circuit rehearing is in process.
According to a joint stipulation filed on September 17, Montana will refrain from enforcement actions, investigations, or cease-and-desist orders regarding Kalshi’s event contracts until the Ninth Circuit either denies further review or makes an en banc decision.
Furthermore, Montana must provide Kalshi with a 30-day written notice before taking any action after this period ends. This agreement is directly linked to Kalshi’s petition for a rehearing following the Ninth Circuit’s ruling in a consolidated Nevada case.
In another update, the CFTC has expanded its no-action relief, potentially easing access for third-party software firms to prediction markets and other regulated derivatives.
The letter issued on September 17 extends similar relief previously granted to Phantom, now available to qualifying passive software providers more broadly. This allows these providers to offer interfaces for users to view markets and place orders directly with designated contract markets (DCMs) or other registered entities without needing to register as introducing brokers.
However, there are stipulations; users must remain direct customers or members of the registered entity, and the software provider is prohibited from holding customer assets or generating explicit buy or sell signals.