Missouri AG issues cease-and-desist letters to six prediction market platforms
In the United States, Missouri Attorney General Catherine Hanaway has issued six cease-and-desist notices to prediction market operators over their sports event contracts.
According to multiple reports, the letters sent to Crypto.com, Kalshi, Novig, Polymarket, Robinhood and Underdog allege that the platforms are offering unlicensed wagering to Missouri residents.
Hanaway argues that contracts based on the outcome of sporting events fall under Missouri gambling law instead of qualifying as swaps regulated by the federal Commodity Exchange Act and the Commodity Futures Trading Commission (CFTC).
She also referred to federal court rulings concerning online sports betting, arguing that sports-related event contracts offered by prediction markets are subject to state gambling laws.
Missouri’s legal sports wagering market launched on 1 December last year, under the oversight of the Missouri Gaming Commission.
The state’s constitutional framework requires licensed operators to verify customers’ ages and restrict wagering to those aged 21 and older.
Hanaway claims that the six operators failed to meet Missouri’s requirements, either by allowing those under the age of 21 to access their platforms or by lacking sufficient safeguards to prevent underage users from participating.
The official said, “Missourians voted for a safe, well‑regulated sports wagering market that supports public education and addresses problem gambling. Companies cannot repackage sports bets as ‘event contracts’ to avoid Missouri law. We will enforce the rules voters approved and protect consumers.”
The letters requested that the operators comply with Missouri’s gambling laws within 30 days, with Hanaway adding that failure to do so will result in enforcement action by the state.
A spokesperson for Polymarket replied, “Polymarket US maintains that prediction markets are regulated by the Commodity Futures Trading Commission under a federal framework, not a patchwork of state rules.”
The notices add to regulatory challenges facing prediction market operators like Polymarket, with the platform also facing opposition from authorities in states like Michigan and Kentucky over its sports event contracts.
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The Backstory
Missouri’s legal market created the line regulators now say prediction platforms crossed
Missouri’s clash with prediction market operators is rooted in a fast shift from prohibition to regulated sports wagering. Voters approved a framework that brought sports betting under the Missouri Gaming Commission, with licensed operators required to verify age, confirm location and operate within state rules designed to protect consumers and generate public revenue. When the market opened Dec. 1, the state moved from years of legislative stalemate into a model built around casinos, professional sports teams and licensed online brands.
That structure is central to Attorney General Catherine Hanaway’s latest action. Her office says sports event contracts offered by prediction market platforms are not simply federally regulated swaps, but wagers on athletic contests that fall under Missouri gambling law. The state’s position is that companies taking sports-related positions from Missouri customers must comply with the same licensing, age-gating and responsible gambling rules as sportsbooks. The issue is not just whether a contract is traded on an exchange. It is whether the product gives consumers an unlicensed substitute for sports betting in a state that has now built a legal market.
DraftKings and FanDuel quickly showed the value of the regulated channel
The scale of Missouri’s new market became clear almost immediately. In the first two months after launch, FanDuel and DraftKings handled nearly three-quarters of the money wagered in the state, according to Missouri Gaming Commission data. The two companies accounted for about 73% of nearly $928 million in wagers and generated about $120 million in profit, underscoring how quickly consumers migrated to established national sportsbooks once legal access became available.
That early dominance followed a costly legalization campaign. As DraftKings and FanDuel dominated the new Missouri sports betting market, reporting showed both operators had spent heavily to help pass the 2024 ballot measure. The campaign promoted education funding and consumer safeguards as arguments for legalization. An external report by the Missouri Independent on operator profits and campaign spending later sharpened debate over who benefits most from the market.
For regulators, however, the financial results also reinforced a policy point. Missouri now has a functioning system for sports wagers, even if tax collections were modest early on. Allowing prediction platforms to offer sports-linked contracts without state licenses could undercut the system voters approved and create a parallel market not subject to the same tax, consumer protection or problem gambling requirements.
Market access deals brought fantasy and betting brands into the state
The launch was not limited to the largest sportsbooks. Operators with fantasy sports roots also positioned themselves for Missouri’s regulated environment. Underdog secured market access through a multiyear partnership with the Kansas City Royals, giving the company a pathway to a sports betting license in the state. The arrangement reflected the constitutional framework that allowed Missouri’s casinos and six professional sports teams to serve as access points for operators.
That deal mattered because Underdog is among the companies now targeted by Hanaway’s cease-and-desist letters. The firm has sought legitimacy through licensing in some states while also building broader sports gaming products. Its partnership with the Kansas City Royals for Missouri sports betting access showed one route available to companies seeking to operate within the state’s rules. The attorney general’s message is that prediction-style products cannot bypass that route by adopting a different legal label.
Missouri’s framework also relies on vendors that enforce the boundaries of legal betting. Geolocation firm Xpoint went live in the state on launch day, saying it would help verify that wagering activity occurred within Missouri’s legal boundaries. Its expansion into the Missouri sports betting market illustrated the compliance infrastructure behind regulated wagering. That infrastructure is part of the distinction state officials are drawing between licensed sportsbooks and prediction platforms that they say do not meet equivalent safeguards.
Prediction markets have expanded as federal licensing became a strategy
The Missouri dispute is part of a broader national fight over whether sports event contracts belong under federal commodities law or state gambling law. Prediction market companies argue that they operate within a federal framework overseen by the Commodity Futures Trading Commission. State regulators increasingly contend that, when the underlying event is a sports contest, the product functions as sports betting and must comply with gambling statutes.
The issue has attracted crypto firms, fantasy operators and trading platforms seeking to use federal derivatives infrastructure to enter event markets. Kraken’s $100 million acquisition of CFTC-licensed Small Exchange showed how valuable that infrastructure has become. The company said the deal would support a U.S.-native derivatives platform, and it signaled interest in prediction markets as part of that strategy. The move placed Kraken among firms looking to federal market structure as a path into products that overlap with betting, as detailed in Kraken’s acquisition of CFTC-licensed Small Exchange.
Kalshi, another target of state scrutiny, has been at the center of the legal divide. It has pursued sports event contracts while facing challenges from gaming regulators in states including Nevada, New Jersey and Massachusetts. Other companies, including PrizePicks and sports betting exchange RSBIX, have also explored CFTC-related avenues. The result is a developing collision between two regulatory systems: one designed for commodities and derivatives, the other for gambling and consumer betting.
College sports added pressure before the prediction market fight escalated
Missouri regulators were already confronting difficult boundary questions before the attorney general’s letters. Less than two months after sports betting launched, the Missouri Gaming Commission rejected an NCAA push to restrict wagers on college athlete props. The commission declined to change its rules immediately, saying it wanted more evidence and time to observe how the market developed. Missouri permits college athlete prop bets except when games involve in-state schools.
The decision, covered in Missouri’s rejection of the NCAA push to restrict college athlete prop bets, showed the state’s early preference for measured regulation rather than emergency intervention. But it also highlighted risks that carry into the prediction market dispute: athlete harassment, coercion, manipulation and the difficulty of policing niche wagers tied to individual performance. The NCAA has extended those concerns to prediction markets, asking the CFTC to stop operators from offering contracts tied to college sports.
An external report by CDC Gaming on Missouri’s consideration of college prop restrictions reflected how recent basketball betting scandals have intensified scrutiny. Those concerns strengthen the argument from state officials that sports-linked products require gambling-specific oversight. If prediction markets can offer similar exposure without the same controls, regulators fear the risks attached to athlete-specific and event-specific betting could migrate outside the licensed system.
The stakes extend beyond six cease-and-desist letters
Hanaway’s notices give the targeted companies 30 days to comply, but the dispute is unlikely to end with Missouri alone. Similar actions in Michigan, Kentucky and other states suggest a coordinated regulatory backlash against sports event contracts. For platforms such as Polymarket, Kalshi, Robinhood, Crypto.com, Novig and Underdog, the core question is whether federal commodities oversight can preempt state gambling enforcement when products are tied to sports outcomes.
For Missouri, the stakes are practical and political. The state asked voters to approve legal sports betting on the premise that a regulated market would be safer than illegal sites and would support public priorities. If unlicensed prediction products remain available, regulators may struggle to protect that bargain. The outcome could help determine whether sports event contracts become a mainstream federally regulated product or are pushed back into the state-by-state licensing model that governs U.S. sports betting.
