Kalshi Sues Missouri Over the State’s Regulatory Attempts

Earlier this week, Kalshi filed a lawsuit against the Missouri Gaming Commission and several state officials, arguing that the regulation of prediction markets falls exclusively under the Commodity Futures Trading Commission (CFTC), a federal entity, not state authority. What Kalshi Argues? The lawsuit marks yet another chapter in the legal war between prediction markets operators and individual states and state gambling regulators. Kalshi has been suing some states and regulators, and Missouri is just the latest target of legal actions. Just last week, Kalshi also sued Louisiana in an attempt to block the state’s enforcement of its gambling laws. Back to Missouri, last month, Missouri Attorney General Catherine Hanaway issued cease-and-desist letters to Kalshi and other prediction market platforms, alleging they were offering illegal sports betting. However, Kalshi argues that the Commodity Exchange Act (CEA) gives the CFTC “exclusive jurisdiction” over financial instruments, including “swaps,” traded on designated contract markets. The company also invokes the Supremacy Clause of the US Constitution, which generally establishes federal law as superior to conflicting state laws. Kalshi contends that the cease-and-desist letter leaves it with only two choices: stop operating in Missouri or obtain a license from the Missouri Gaming Commission, pay all applicable state taxes and fees, and restrict access to users under 21. The letter set an October 16 deadline for compliance and warned that failure to meet the requirements could result in legal action. Missouri isn’t the only state with which Kalshi has been involved in legal troubles this week. On Wednesday, Utah filed 14 criminal charges against Kalshi and its co-founders, accusing the operator of violating state gambling laws by allowing users to bet on sporting events. Missouri Says Sports Betting Should Be Regulated Missouri maintains that Kalshi’s event contracts do not meet the definition of “swaps” under the CEA. In the cease-and-desist letter, Hanaway argued that Missouri’s position aligns with that of most federal courts, which have determined that Kalshi’s online sports wagering platform is subject to state gambling laws. She contended that the CEA does not preempt state gambling regulations in this area and that Kalshi’s event contracts constitute bets rather than swaps under federal law. A spokesperson for the Missouri Attorney General’s Office argued that sports betting should be subject to the same regulations regardless of whether wagers are placed through online prediction markets or traditional casinos. The spokesperson emphasized that both constitute sports betting and are therefore subject to the licensing and taxation requirements approved by Missouri voters. The office also reaffirmed Attorney General Hanaway’s commitment to enforcing state law, expressing confidence that federal courts would not prevent her from doing so. In other news from Missouri, casinos in the state recorded increased revenue year-on-year, despite the decrease in table gaming in recent months.