Kalshi battles Missouri bid to crack down on illegal gambling

The prediction market giant says its "sports event contracts" are exclusively governed by the Commodity Futures Trading Commission. Missouri is betting against that interpretation.ST. LOUIS (CN) — Kalshi sued the Missouri Gaming Commission and several state officials Wednesday, claiming they cannot regulate prediction markets because that authority lies solely with the federal government.Prediction markets have spread like wildfire since the Trump administration’s Commodity Futures Trading Commission embraced the new platforms that allow all adults to trade on sports, elections and other real-world events, regardless of local gambling laws. Odds are set by the public rather than “the house” at a traditional sportsbook, but trades are essentially the same as bets — though states have so far struggled to regulate them as such.Like dozens of other states, Missouri argues Kalshi is playing loose and fast with gambling regulations. Last month, Missouri Attorney General Catherine Hanaway sent a cease-and-desist letter to Kalshi and other prediction markets claiming they offer illegal sports wagering.“If you are going to bet on the Chiefs beating the Broncos, the rules should be the same regardless of whether the bet is placed through an online prediction market or at the casino," a spokesperson from the Missouri Attorney General’s Office said. “In both situations, it’s sports betting — and Missourians voted to subject sports betting to licensing and taxation rules. Attorney General Hanaway will enforce the law, and we are confident the federal courts will not prevent her from doing so.”In its federal lawsuit, Kalshi insists the Commodity Exchange Act grants the CFTC “exclusive jurisdiction” over instruments, including “swaps,” traded on designated contract markets. The prediction market leans on the supremacy clause of the U.S. Constitution, which generally gives the feds an upper hand in disputes over conflicting state laws.Kalshi argues the cease-and-desist letter only gives it two options: cease and desist, or obtain a Missouri Gaming Commission license, pay all associated state taxes and fees and stop serving Missouri adults under 21 years of age. The letter demanded compliance by Oct. 16, threatening legal action if Kalshi did not comply.“The supremacy clause does not tolerate that result,” Kalshi says in its lawsuit. “Ceasing operations would place Kalshi in tension with, and could jeopardize its compliance with, the CFTC’s impartial access requirement, which requires a designated contract market to provide its members and other eligible participants with impartial access to its markets and services, among other things.”Missouri believes Kalshi’s “event contracts” do not qualify as “swaps” under the Commodity Exchange Act.“Missouri, however, shares the same view as the majority of federal courts, which have ruled that Kalshi’s online sports wagering platform is subject to state gambling laws, both because the CEA does not preempt state law in this area and because Kalshi’s ‘event contracts’ are bets that do not qualify as ‘swaps’ under the CEA,” Hanaway wrote in the cease and desist.Kalshi, which filed suit in the Eastern District of Missouri, seeks as injunction blocking the state from enforcing the letter. It names the Missouri Gaming Commission, Hanaway, Missouri Gaming Commission Executive Director Michael A. Leara and Gaming Commissioners Jan A. Zimmerman, Kevin Spaulding, Kevin Cantwell, Sam K. Gladney and Roger Stottlemyre as defendants.Subscribe to our free newslettersOur weekly newsletter Closing Arguments offers the latest about ongoing trials, major litigation and rulings in courthouses around the U.S. and the world, while the monthly Under the Lights dishes the legal dirt from Hollywood, sports, Big Tech and the arts.Additional Reads