Crypto.com’s North American Derivatives Exchange (NADEX) and sports prediction market firm Novig filed federal lawsuits on Oct. 16 against Missouri authorities. Both companies challenge Attorney General Catherine Hanaway’s classification of sports event contracts as gambling, arguing that their status as CFTC-registered exchanges means federal law preempts state gambling statutes. The outcome could reshape how prediction markets are regulated across the country.
Crypto.com’s North American Derivatives Exchange (NADEX) and sports prediction market firm Novig filed federal lawsuits on Oct. 16 against Missouri authorities, challenging the state’s classification of sports event contracts as gambling, BigGo Finance reported. The suits were filed in the Western and Eastern U.S. District Courts of Missouri, respectively.
The filings coincide with the expiration of 30-day deadlines set by cease-and-desist letters that Missouri Attorney General Catherine Hanaway sent on Sept. 16–17 to six companies: Crypto.com, Novig, Kalshi, Polymarket, Robinhood and Underdog.
What Missouri Demanded
Hanaway notified the companies that they must either stop offering sports event contracts to Missouri residents or obtain a license from the state gaming commission and pay a 10% sports betting tax. “Companies cannot evade Missouri law by dressing up sports betting as ‘event contracts, ” Hanaway said, according to BigGo Finance.
In Crypto.com’s case, Hanaway flagged the fact that users as young as 18 can trade on the platform. Missouri’s minimum legal age for sports betting is 21.
NADEX’s Federal Preemption Argument
NADEX argues that as an exchange registered with the U.S. Commodity Futures Trading Commission (CFTC), exclusive regulatory authority over event contracts rests with the CFTC under the Commodity Exchange Act. The company contends that federal law must take precedence over state gambling statutes.
NADEX asked the court for a declaratory judgment confirming that regulatory authority, along with a permanent injunction barring state enforcement. The company also cited the fact that Missouri’s two available mobile sports betting licenses have already been allocated, making it effectively impossible to obtain a new license.
Novig’s Filing
Novig filed suit through its exchange operator, Ludlow Exchange, in the Eastern U.S. District Court of Missouri. The company is seeking both a preliminary and permanent injunction.
Novig argued that because Kalshi’s Iowa case addressing the same issue is being heard by the Eighth U.S. Circuit Court of Appeals, it needs to maintain its current operations until a ruling is issued.
Circuit Court Split
U.S. courts have split over whether federal derivatives regulation or state gambling laws take precedence for sports event contracts, according to BigGo Finance. The Sixth and Ninth U.S. Circuit Courts of Appeals have ruled against Kalshi in related cases, while the Third U.S. Circuit Court of Appeals sided with Kalshi.
The new lawsuits represent an effort to reaffirm the principle of federal preemption amid this patchwork of rulings.
Four Companies Stayed Out
As of Oct. 18, Kalshi, Polymarket, Robinhood and Underdog had not filed suits in Missouri. BigGo Finance reported that Kalshi is reportedly in talks with the Missouri attorney general’s office.
Industry observers told the outlet that legal strategies are diverging among companies. Some are pursuing litigation, others are negotiating and still others are taking a wait-and-see approach.
Potential Ripple Effects
If Crypto.com and Novig prevail, the argument that federal regulation preempts state gambling laws would be strengthened. Companies that did not sue would have a precedent they could invoke in future disputes.
If they lose, other states would have greater justification to adopt similar regulations. Companies like Kalshi, Polymarket and Robinhood would face heightened regulatory uncertainty and potential compliance burdens.
We will continue to track these cases as they develop. The rulings could have significant implications for how prediction markets operate in the U.S. and whether state-level gambling frameworks apply to CFTC-registered exchanges.
